The upper
left panel of The Wall Street Journal
made mention of the 25th anniversary of Black Monday, October 19th,
1987 when the Dow dropped 508 points to lose 22.6% of its value. A comparable drop today, per the Journal, would be over 3,000
points.
I instantly
recalled several key things. Personally
I recall my ex-wife, then newly pregnant with our first child and
understandably exhausted all the time, calling me from her job as a supervisor
in the telephone brokerage group at Fidelity Investments. I recall our parents, children of the depression, and their reactions.
And I recall
my mentor/boss at the time who about a decade later appeared on the cover of BusinessWeek telling me now was a
great time to pick up Ford and GE stock as it was ridiculously low priced. Now was not the time to sell, he told
me. It was a little like “camping in a
rainstorm.” Just stay inside the tent,
hope to stay dry, and wait for the weather to clear.
In the
aftermath, it came out technology had played a role. Computerized trading that fed on itself
exacerbated the problem. It was a lesson
learned on the ways in which technology automation increased the velocity of
commerce. We’ve seen it in all sorts of
ways. Inventory turns represents
one. The talk of the collapse of the
middle class represents another. We have
fewer middle class jobs as technology automation renders moot the need for the
labor. Fewer middle managers need to
aggregate computerized reports when we have real time dashboards and predictive
analytics. In one technology company
where I have provided consulting and market research services for decades, the
number of individuals employed in market analysis functions dropped from 160 to
40 while the company revenue climbed.
Recently the
cratering of the housing market can be linked to the notions of derivatives and
tranches undoubtedly concocted with leading edge technology driving the
calculations and equations.
The next big
thing right now radically altering commerce consists of analytics, best represented by IBM Watson. And IBM Watson follows a very
traditional migratory path for expensive, leading edge products. It started in government and then moved to
financial and medical markets.
Government can pay exorbitant sums for the leading edge technology in
the interests of national security: I.E.
The “protection of the commons” in the aggregate. As it becomes commercialized, it migrates
down through to areas with critical time value components. And that, to paraphrase the old Jack Benny
line, boils down to “Your Money or Your Life” or the financial and medical
markets.
Today the technology
industry aims its labor stripping weaponry directly at itself through disruptors
such as mobility, cloud and big data that will radically transform the
commercial landscape of the technology industry in ways not yet fully fathomed. Watch earnings announcements of the broad
based suppliers such as HP and IBM (as well as some current titans such as Microsoft and Intel). HP remains
too dependent on iron right now, but has means to shift and will have some
rough quarters as Meg Whitman finally acknowledged publicly.
IBM has a
history of shedding iron and seems well ahead of the curve strategically compared to HP. It has exited
PBXs, typewriters, printers, and PCs.
Lou Gerstner pivoted the company into software and services. Its road map is clear. With IBM it is entirely conceivable we will
see revenue stay flat for several years while profits climb due to shifting out
of product revenue streams with commodity gross margins into value added
services built largely around automated delivery mechanisms.
Labor free
services or utility computing, if you will, which will undoubtedly be pervasive
on the 50th anniversary of Black Monday.
And begs the
question as to what we humans will be doing with ourselves to make a buck.
With any
luck I will have my faculties and sufficient retirement funds to be able to view it from the
sidelines and not as some surly Wal*Mart greeter.
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