Dumb And Dumber
“What we call progress is the exchange of one nuisance for another nuisance.”
“Information,” said my friend Jim Davidson, “should be seen as the recipe for progress. That is why the Information Age is truly revolutionary. Reducing the price of information to zero makes more and better recipes available. The effect will be to allow a major increase in economic growth rates…much like the increase that took place in the industrial revolution.
“Look, there’s no law that says GDP growth and productivity have to grow at 3% per year. For most of mankind’s history, they didn’t grow at all – or grew at rates that were negligible. But the industrial revolution made possible a big improvement in economic growth rates. It really was different.
“And now the information revolution does the same thing. For the first time in human history, the recipes are accessible to almost everyone…and can be improved by the world’s brightest people, no matter where they are. Productivity and economic growth rates are going to ratchet up…this time, too, it really is different.”
I spoke with Jim when I was back in Baltimore. We had dinner with a few friends in our corporate dining room – an elegant relic of a more prosperous city, once owned by an American ambassador and used to host presidents Taft and Wilson when they visited.
There were none of the fair sex present, so we were able to talk freely about the subjects that most interest American men in various stages of mid-life decomposition. We began by noting how hollow and pointless it was to try to make a lot of money… and spent the balance of the evening trying to figure out how to make more of it.
Jim, as you can see for yourself from the paraphrased and condensed comments above, is a believer in the enriching power of information. I pass along his comments, as you may have guessed, merely to take issue with them.
“The more information people have, the dumber they get,” quipped my friend Michel about a year ago. At that time, we were even more ignorant than we are today of what the Information Age might mean. Michel’s comment might have been taken as either an observation, or a prediction.
Metaphorically, the quantity of available information – recipes or not – grows up like a dense underbrush, through which in has become difficult to see much of anything, including the forest.
And theoretically, the Information revolution makes possible a further division of labor, which stretches out the division of knowledge. A person is able to earn a living, drawing on a remarkably narrow, if deep, body of knowledge. Thus, a computer programmer may know nothing about fluid mechanics, botany, horse-shoeing, haberdashery, electrolysis, Italian opera, the credit cycle, or chopping wood. Yet, he eats well, drives the latest product of the automobile industry and wears clothes designed by gay Italians.
As the division of labor expands, more and more people know less and less about more and more. Or, put differently, they know more and more about less and less – as each narrowly-based activity requires more and more knowledge to master.
Have you noticed that people seem dumber today than they did a few years ago? If you were searching for an explanation, perhaps this will do: “They have reached a limit of what they can store in their brains,” opines Dr. David Cantor, director of the Psychological Services Institute in Atlanta. “These people forget things because they were too distracted to absorb them in the first place.”
People have neither the time nor the ability to hack through the ragged jungle of facts in which they are trapped, in other words. Instead, they burrow down, in some little niche of the New Economy, ignorant of the world around them…and hope to strike gold.
A year ago, this was just tall guessing. Now there is evidence.
“Young people today are becoming stupid,” says Dr. Toshiyuki Sawaguchi, professor of neurobiology at Hokkaido’s school of medicine. “They’re losing the ability to remember new things, to pull out old data or to distinguish between important and unimportant information. It’s a type of brain dysfunction.”
“Growing numbers of people in their twenties and thirties,” reports an article in the Sunday TIMES of London, “are suffering from severe memory loss because of increasing reliance on computer technology…computer technology, electronic organizers and automatic car navigation systems. They claim these gadgets lead to diminished use of the brain to work out problems and inflation ‘information overload’ that makes it difficult to distinguish between important and unimportant facts.”
The evidence is both clinical and anecdotal. “One high- flying 28-year-old salesman…”reports the Sunday TIMES, “was forced to give up his job when he found himself forgetting where he was going, who he was supposed to be seeing, or when he finally got there, what he was selling.”
“Errors may occur in the brain’s software that have nothing to do with age, but are related to someone’s lifestyle,” said Dr. Takashi Tsukiyama, who runs a private clinic in Tokyo, “such as not using your brain enough.”
Your correspondent…trapped by the facts like everyone else…trying to hack his way out…Oh for some napalm!
Bill Bonner Paris, France February 6, 2001
*** Last March, Cisco was selling for $81. It fell to an intra-day low below $32 on January 3rd. Then, the Greenspan Put came into play and the market rebounded. Here we are, already into February, and the stock is back up to $33.50… still, it’s down almost 60% from its high.
*** Cisco fell 3% yesterday. Yahoo rose 6%.
*** The financial news is a knot of contradictions and paradoxes. The Dow rose 101 points. But the Nasdaq fell 17.
*** Consumer confidence is at a 4-year low…but the Cleveland Plain Dealer reports that mortgage activity rose between 100% and 150% from December to January.
*** “The applications have been rolling in like crazy,” said a spokesman for Third Federal Savings in Cleveland. Half of the applications are for refinancings and a third of those are “cashing out” – drawing down equity in their houses.
*** The “R” word is all over the world’s financial press. Gene Epstein of Barrons’ did a computer count of the word in the Wall Street Journal database. Turns out, more people are talking about recession now than before any recession in recent times.
*** Does that mean we won’t have a recession? Has it already been fully discounted by the markets? Is it already over? Hmmm… Isn’t Mr. Market always full of surprises?
*** A humble guess: When the news media speak of ‘recession’ they refer to a mild down turn which is expected in the first two quarters of this year. Almost every economist, analyst and investor expects this ‘trough’ to be short, shallow and relatively sweet. Some think the worst is already behind us. And almost all look across it to the good times on the other side. The big surprise is likely to be a deeper, longer, and less pleasant downturn than they can now imagine.
*** “Where’s the R?” asks John Crudele in the New York Post. Crudele notes that the U.S. economy created 268,000 new jobs in January…a rate higher than that of the Clinton years. How can you add jobs at that pace in a recession? But the unemployment numbers are rising too. What gives?
*** In a narrow sense, the labor numbers are hard to figure and may not mean much…considering all the adjustments to which they may be subjected. In a larger sense, there are so many financial ‘facts’ available to us that the net effect is that we know absolutely nothing – more below.
*** And how about this: Internet companies sacked 43,000 workers last year. “Dotcommers bear the brunt” weeps a headline from the Financial Times. Yet, another paper, the S.F. Gate, tells us that “Cash Cascades into Internet Firms’ Coffers.” Venture Capital investors dropped $7.9 billion on the dotcommers in the last quarter. In the year as a whole, $47.8 billion was invested in Internets – nearly half the entire VC total.
*** Bad money after good was also the theme of a note from Dan Ferris: “I overheard a young man telling his wife,” he writes, “that it’s OK that their portfolio lost 40% last year because this is a great time to buy. Sure, they lost a lot of money, but they got through it. They’re OK, and they have plenty of money left to buy more shares.”
*** Two headlines from the Financial Times capture the mixed up sentiments of the day: “Fed to the Rescue,” says one. “Has the Fed stifled U.S. growth?” asks another.
*** GE rose 3% yesterday…gold fell $2.
*** You may remember the collectivist delusion of Japanese investors at the peak of the mania: “If we all cross against the red light together,” one commented, “we will all be okay.”
*** Maybe Dallas Fed President Robert McTeer had a similar thought in mind last week, when he made this suggestion to the world’s most indebted consumers: “If we all join hands together and buy a new SUV, everything will be OK.” He ended his speech by urging his audience to “Go out and buy something” in order to keep the boom alive.
*** Economists Paul Kasriel and Asha Bangalore report that “Household non-mortgage interest payments as a percentage of disposable personal income are at the highest level since this series began in January 1959.” But don’t worry about that: mortgage, mortgage, mortgage…spend, spend, spend.
*** Americans are already living so far beyond their means that they rarely even see each other. ‘Their means’ tend to live in a more modest house in a rougher neighborhood. The private sector financial deficit now equals 6% of GDP…or about $2 billion per day. And the current account deficit, illustrated by a negative balance of trade of more than $1 billion per day, has risen to more than 4% of GDP. Somehow, sometime…these out-of-whack figures will be corrected. If there is symmetry in the world, dear reader, these tides will ebb as well as flow.
*** “Tourism is now the number-one industry in Nicaragua,” says Kathie Peddicord, “replacing fishing. Of course, the fishing is still good…but the cruise ships are depositing as many as 3,000 people per week at the dock in San Juan.”
“In Managua, for example,” Kathie continues “signs of the current economic growth are everywhere. The brand-new InterContinental hotel is first-class. Also new on the horizon in the past two years are a Princess Hotel and a Holiday Inn. There’s a Subway (sandwich shop)…a TGI Friday’s…a Radio Shack…and plans for a Hard Rock Cafe.”
*** “Investing in Nicaragua is truly pioneering,” writes Steve Sjuggerud, who recently opened what he calls a “high- end” resort for surfers at our place on Rancho Santana. “There are unforeseen risks, and questions that can’t be answered. But that’s what allows you to be able to buy a few hundred acres on the beach – for less than a million dollars, which you can still do here.”