It was raining when I left the office last night. Not wanting to give up my promenade, I set off with my umbrella, rather than take the subway.
I find that I can read on the subway. But it is hard to think. There are two many people and too much activity. By contrast, on the hour-and a quarter walk…the sensations seem to come at a slower rate. Information is all around me – sights, sounds, people – which I take up with great interest. But they don’t “lurch out and grab me by the throat.”
Thus was I able to cross the Pont des Arts – admiring the way the lights of the Louvre slipped and slid on the wet pavement – while still cogitating on yesterday’s breathtaking insight:
My friend Michel suggested as much months ago. “More information makes people dumber,” he said. But the thought seemed so counter-intuitive…and so theoretical…that I resisted it.
But now, the evidence is mounting. And the theory is beginning to make more sense.
Overwhelmed by the rush of sensations, people are unable to think. There is too much to think about. So, they look for short-cuts…ways to understand the data without studying each and every bit of it themselves. They are forced, by the flood of information, to the high ground of collective thinking.
Personal experience and direct observation – for which there is never enough time – are replaced with off-the- shelf explanations. Mass ideas replace custom made ones.
You may be concerned that I will bring up Nietzsche’s two forms of knowledge at this point. But I will save him for later.
There is a big difference between thinking for yourself and mass thinking. In the hands of the mob, ideas get hollowed out like campaign slogans, to the point where they are completely empty. They appeal, not to the reason of an intelligent observer, but to the lowest common denominator of emotion.
And emotions themselves are turned into puerile imitations, not the real things. For proof of this, I refer to you David Broder’s amazingly idiotic comments on the American election. Broder wrote in his NYTIMES editorial, that this Thanksgiving was the “saddest” since JFK was assassinated. Certainly the death of someone you know is cause for real sadness. But a close vote in a presidential contest – with the attendant charges, countercharges, carpet-baggers and lawsuits – should be a source of amusement to any sensible man.
Broder’s `sadness’ was not the genuine, personal emotion you see expressed at pet funerals. It was a different kind of emotion – a mass-marketed pseudo-feeling, stocked on shelves all over the nation for anyone who didn’t have an emotional life of his own.
“Crowds,” as H.L. Mencken observed, “properly worked up by skillful demagogues, are ready to believe anything and to do anything.”
Coincidentally, I have been reading two memoirs of Jewish economists who grew up in Nazi Germany. Henry Kaufman and Albert Hirschman. Then, as now, there was no shortage of ideas and information available. Young German intellectuals read Marx, Lenin, Engels, Kautsky, Nietzsche and scores of others. They joined discussion groups and sat around drinking strong coffee and arguing about dialectical materialism. They published their own newspapers…dozens of them…and battled opposing groups on the street corners.
Even after the Reichstag fire, when Hitler outlawed these agitating groups, reports Hirschman, they continued to meet…and distributed their ideas on mimeographed manifestos. Groups came and went – each with its own angle; its own plan for a better world. Hirschman recalls that he joined a schismatic bunch of gabby youths in something they called the Socialist Workers Party…which was known as SAP.
One does not have to be a historian of the 20th century to know that upon this rich manure pile of information, ideas, and opinions…a thousand flowers did not bloom. Instead, the most malignant imbecilities flourished…crowding out and eventually smothering all the competition.
Even the SAPs realized that if they wanted to win in the political arena, they couldn’t permit dissenting opinions. Mass action requires mass thinking…which mean uniform thinking. This insight, of course, was not missed by Hitler or Lenin – who lost little time in destroying the media outlets of their enemies, preparatory to destroying them personally.
The ordinary German citizen in 1935 had access to far more information than anyone in history had ever had. Trains, planes, automobiles…telegraph, telephone…newspapers, radio… Berlin was also host to thousands of refugees from Russia…and to intellectuals from all over the world. Its universities were the best on the planet – its level of cultural development…music, art, literature…second to none.
And yet, the whole society was overwhelmed by such galloping dumbness that it seemed to do the worst possible thing in the worst possible way. Chasing chatterbox economists such as Kaufman and Hirschman out of the country may have been no great loss. But, alienating…and then murdering…a whole race of scientists – including the physicists who would eventually build the atomic bomb – is further proof not just of sublime stupidity…but evidence to that people get what the deserve rather than what they expect. In the end, the blockheadedness of German mass thinking led to the near-total destruction of the nation. By 1945, the Reich had ceased to exist.
And to the East, the wealth of ideas and information that emerged in the early 20th century had an even worse consequence. Russia fell into such an abyss of mass stupidity that it took two generations to climb out of it.
But what has that got to do with the Information Age…you may be wondering?
In the early 1900s, the ideas and information that people argued about were political. The greater the abundance of such `information,’ the more likely people were to turn to mob-like interpretations of it. Intellectuals in information-rich centers such as Berlin, Paris, St. Petersburg and New York – were soon wearing red scarves or swastikas and acting like morons. While people in rural areas went about their business in ignorance and relative dignity.
Nearly 100 years later, we have yet more `information’ than ever. It lurches out of the worldwide web like Nazi youth groups – and clutches at our hearts and minds. Will it make us smarter…or richer?
More to come…dear reader…more to come…
Paris, France November 28, 2000
P.S. It rained harder and harder as I walked home. My feet got soaked…but the views, especially of the Seine, were spectacular.
*** George W. Bush claimed the presidency yesterday…and the long-awaited post-election rally finally got underway. But like so many things in this Autumn of Anxiety – the celebration didn’t go exactly as planned.
*** The Blue Chips managed to end the day up a modest 75 points. But the Nasdaq couldn’t keep up. After almost bumping up to the 3,000 level, the tech rally fizzled and the index was 23 points lower at the close of business than it was at the beginning.
*** There are “some fundamental questions dogging technology stocks,” opined one analyst. Yes, and the big question is: why would any investor pay so much for so little in earnings?
*** Investors are beginning to realize that technology itself may be cumulative, but tech stocks are cyclical. “The average industry group has outperformed the index this year in most global equity markets,” writes Michael Belkin in Strategic Investment. “That is simply a function of technology, media and telecom underperformance. TMT [tech, media, telecom] became a large percentage of index capitalization over the past several years – as portfolio managers piled into sexy New Economy stocks. There was little interest in stodgy old (profitable) companies while the prospect of instant gratification in TMT existed.”
*** Techs, you may recall, were supposed to be resistant to the normal cyclical forces: interest rates, credit, consumer spending, inflation, employment. Techs were thought to inhabit a very new world – a New Economy, where the old economic laws didn’t apply. Even the law of gravity was thought to be ignored, as tech stocks drifted further and further into space.
*** “Ironically,” continues Belkin, “tech has become the most cyclical sector of the U.S. stock market, simply because the valuations and expectations are so high for growth stocks that there is absolutely no margin of error – When a high-flyer misses by a few pennies or guides future estimates lower, it gets dumped immediately.”
*** Yesterday, it was Broadcom that disappointed investors. Salomon Smith Barney warned that Broadcom might not do as well as thought. So, their fantasy `target price’ was lowered from $300 to $200. Broadcom shares slumped 17% – to below $100.
*** But it was a good day in the retail sector – even for on-line retailers. etoys rose 10% on news that Friday’s holiday shopping on-line was 27% ahead of the year before. On-line sales in the 3rd quarter grew 15% over the previous quarter. And on-line sales during the holiday season are expected to double from 1999.
*** Our favorite on-line retailer, Amazon.com, joined yesterday’s party. But then, it had to leave early. The stock finished down 3%.
*** Henry Blodget, cheerleader…I mean, analyst of the Internet sector, has turned cautious on AMZN. It could be a bad sign, he noted, that Amazon decided to extend the deadline on its Free Shipping offer to customers. Blodget – who never met a stock he didn’t like – continues to rate AMZN as “accumulate/buy.”
*** Existing home sales were slower than expected in October. Only 4.96 million were sold, compared to 5.16 million in September.
*** Bonds and the dollar fell yesterday. The euro rose 2% against the dollar.
*** “I have seldom experienced such a widespread negative sentiment about a currency as is now the case for the Euro,” wrote Marc Faber two weeks ago. “This bearish sentiment and total lack of confidence in the Euro reminds me of the desperation investors felt about the U.S. dollar in 1980, just as it embarked on a powerful five-year bull market. Thus, given this bearish consensus…I advise investors to gradually shift some of their funds into Euro- denominated highest-quality bonds.”
*** Gold rose too – up $3.l60. Those mining companies I mentioned a few days ago seem to be stirring.
*** Net inflows into equity funds are declining…they fell 28% from August to September. Lipper believes they fell another 50% in October.
*** And the WSJ reports that day traders are returning to their jobs…and that “Value Investing Suddenly Makes Sense Again.”
*** “Over the past 30 years,” writes John Myers, “the world’s population has increased by as much as the 100,000 years prior to the mid 20th century. According to an estimate by the US government, $25 trillion in energy investments over the next half century is needed to meet developing world demand… There is no better place for your money right now than the energy sector.”
*** The FDIC, which insures bank deposits, warns that the nation’s banks are over-exposed to real estate loans. Called the Real Estate Stress Test, the FDIC’s November report states, “Between 1987 and 1995, even though it was a period that included the New England and California real estate crises, the percentage of very vulnerable banks never exceeded 5% of the total. But by December 1999 that percentage was at 8%, and it now exceeds 9%. An additional 15% of the industry is identified as somewhat vulnerable should an economic downturn take place.”
*** “The ‘crisis’ continues…” says Dan Ferris, referring to rising electricity demand in California. According to Penn Net’s Power and Gas Weekly, “California is still struggling to keep the power on. With electricity reserves under 7%, the California Independent System Operator (ISO) called a Stage 1 emergency alert at 5:30 a.m. [last] Monday as the state continues to flirt with power outages.” These power outages, says Ferris, “will probably go on for another 12-18 months, due to the fact that it takes awhile to get a power plant built.”
*** All over the world, markets and economies seem to be in decline. Tokyo stocks are still less than half their all- time highs set 10 years ago. Thai stocks are down 80% from their peak. In the Philippines, stocks are down 50%. In Indonesia, they are off 40%. TMT [tech, media, telecom] stocks are in decline in the UK, France and Germany – down about 40%, along with the Nasdaq.
*** A forecast: If, as we suspect, American consumers, investors and businesses get what deserve, rather than what they expect – deflation and recession will force Americans to reduce spending and begin saving. The dollar will fall. Stocks will retreat to “Big Bottom” levels…and the whole world economy will slow down further. Euro bonds…and gold stocks…will turn out to be good investments.