Glad to See Him Go
I'm glad to see O'Neill resign as Treasury Secretary. Other than his much publicized African tour with Bono, O'Neill didn't do much good. Tax cuts, low interest rates, etc have kept the average consumer spending and buying homes - which is really what's buoying this economy right now. What hasn't rebounded is business spending, and that's what's keeping things in the can and ticking unemployment higher. Presidents can help things on a macro-level, but it still requires that businesses of all sizes do their part. And that's the rub. Presidents don't hire people, businesses hire people. And if businesses are skittish about the market, then they don't hire people. O'Neill didn't do much to offer up confidence for business and the market to start moving forward again, and that's what has led to his downfall. Treasury Secretaries can exert some influence, but by and large they are Cheerleaders, and O'Neill just didn't cut it at that even.

Consider the 90's for example. Clinton was a good steward of the economy during his tenure, with the help of Larry Summers and Robert Rubin as his economic guides, and Greenspan helming the Federal Reserve largely because these men didn't get in the way of the economy and start throwing up all sorts of obstacles. However, in my view the person most responsible for the economic success story of the 90's is none other than Bill Gates. (*Gasp*!) Yes, ther Nerdy Evil One. Think about it though. The beginning of the 90's saw a computer market somewhat split between Apple Macintosh and the PC clones. Then two developments occur simultaneously at the same time that set the stage for the rest of the decade: MS Windows & Intel's Pentium processor. In relatively short order you have an expansion of computer power readily available to the average customer and an operating system that makes computer applications more approachable for the average user. Soon, the PC clones take off: Compaq, Hewlett-Packard, and most importantly DELL. Why Dell? Simple, Dell targeted Big Business with their Go Direct strategy and Big Business responded by hoovering up information technology like there's no tomorrow. Concurrently, the Internet (which existed since the 50's) became democratized in a more accessible form through the creation of the World Wide Web. Add all this together: Increases in computer power at lowering prices; the adoption of a universal Operating System that allows for software standards and transfer of computing skills/knowhow across multiple industries and markets; and the expansion of an information network steadily transforming itself from not just a text based, but also a graphic/video/sound based interactive medium.

So pretty much everything takes off. Lots of computers, a familiar operating system that everyone is using, and a cool network that allows for the transfer of information in eye-catching audio/visual format. So immediately companies like Cisco and 3Com get cranking because demand for their data routers is limitless. (Even Cabletron too, but somewhere along the way they stumbled and never recovered. Perhaps Kreblog has the inside story on what happened). People and businesses want networks. They want access to networks. And they want the information to get to them at faster speeds. So companies are cranking out faster speed modems. Communication lines become upgraded: T1, DSL, fiber-optic Broadband. Software companies sprout up to provide new ways to arrange, package, and present data. Internet friendly coding languages are utilized to make the audio/visual experience more seamless and interactive and informative. Soon every company has a website of their own and begin telling their story, hawking their wares, making it another avenue of business relationship. Soon it's why go the Brick & Mortar locales at all? Why leave the house? Everything you want is on the web. Click and buy in one sitting. Not on the web? No way are you going to survive. Everything is running on full steam. The possibilities are endless. The Web is the Way! Forecasts are through the roof. The internet marketplace is limitless. Network Bandwidth has to be ratcheted up because the demand is going to explode. Communications companies are laying fiber-optic everywhere. Global Crossing is circling the Earth in fiber. The pace of business is now measured in photons. Stocks are going up. You don't own stocks? Where the hell have you been? Companies are getting rich. Salaries are exploding. Dot-com kids are making millions selling ideas to venture capitalists. There's no end in sight!

And then *poof*. It all collapsed. All the expectations went unmet. Forecasts were unrealistic. All the hype was misplaced. And then came the reports of the accounting scandals. How high profile companies cooked the books. How all that hype was based on myth. Companies that double and triple ordered went and canceled those orders - erasing "profit" from someone else's books. Numbers were revised downward. Outlook deflated. Business orders for parts decreased (existing inventory had to be cleared off of shelves first). Business travel became an unnecessary expense, thereby putting the airlines in a pinch (never mind what the effect terrorism had on their business). Stock wealth disappeared overnight. 401k balances vanished. The Party was over.

That's not to say that it all was a myth. You might say that pretty much until things got crazy at the end the boom of the 90's made sense because of all these simultaneous developments in technology. Indeed, I mentioned Bill Gates as responsible for the 90's economic boom. He certainly had help from others what with so many prosperous industries coming to life in the 90's - offering products and services that relied on his Windows and the spinoff effects that resulted. But think also of the saturation levels that have been hit as the technology boom of the 90's ran its course. PDA's, Cell Phones, DVD players, etc. For something like the 90's to occur now, you have to have an exponential jump in an adoption of next generation technology and then hold on tight for the spinoff effects to happen and other business to spring up like wildflowers and expand on these newer technologies. Think about it in this way. How much different was 1981 to 1989? Compare and contrast that to 1991 and 1999 and the difference with the latter is much greater I believe. As a small example, think about it in computer gaming terms: How big was the difference between the Atari 2600 of the early 80's and the Nintendo of the late 80's? Big, but now compare the Nintendo to the Playstation 2/XBox and these newer machines capabilities and the differences are HUGE. A Cell Phone in the early 80's was a 3 pound lead-acid battery type that operated on 3 watts of power and ran off of analog radio waves. Now TMobile is offering the tiny digital video camera phone for $100 bucks and a boatload of calling minutes and runs off something like 0.03 watts. See what I mean about huge exponential shift in technology? That's what the 90's boom rode on and that's why I say Gates is the posterchild for this era. Not Clinton and not his advisors.

So what does this all mean for right now? It means Bush and Co can nip around the edges and try to make sure the macro-economic conditions are favorable. (Low Taxes, Low Interest Rates, etc). But what it's really going to take is some major technological moves. Not just nipping around the edges and making DVD players smaller, or a better video cell phone, or something that we already have and just perfecting that a tad here and there. No, if we do that then we'll continue to coast in some form or manner. The economy probably won't go in the dumper, but it won't skyrocket either. No, what its going to take to get not just consumers excited but Businesses excited to buy and produce more are some big technological shifts that get everyone jazzed up again like it happened in the 90's. Whose going to do it and what technological shifts and developments need to happen is anybody's guess, but that's (in my view) what it's going to take to get things humming again. We need a new Gates.