Articles & Texticles

I’ve just finished reading a book thrown out last year by the college library, that was written by Stewart Brand way back in 1987. It’s called “The Media Lab – Inventing the future at M.I.T”¹ and it lays out a future where pretty much all human experience in the developed nations will be mediated, one way or another, by the computer.

Most of its predictions are startlingly accurate when seen from this end of the telescope.
The passage that I quote below was especially resonant, because it gave an uncannily accurate forecast of today’s economic turbulence.

The reported conversation was between Stewart Brand and Peter Schwartz, both of whom are now board members of The Long Now Foundation

Despite its length, it’s worth the read, if only to understand quite how we got into the economic state we are in today. Blame it on computers!

Read the quote below the fold:

“This century was shaped by the structure of industrialism,” Schwartz began. “A set of rules was enshrined toward the end of the nineteenth century about how life and the world was to be organized.
It led to the cities, it led to the kinds of technology we have, it led to the economic structures that we have. They were very deep structural rules that later became organized and never really questioned.

“Now our technology has progressed so that increasingly the wealth creation process has to do with information instead of with the material manipulations of manufacturing.
That is, the value added in the transformation of stuff has to do with our capacity to understand and use information in various ways.
If that’s the case, then you have to ask yourself, how’re the rules of that system going to be written?
The way they’re going to be written is just in the practical steps that people take.
“The principal information technologies—the means—we’re talking about are telecommunications and computing. So what will drive this change?
Well, as the manufacture of things like textiles and steel and automobiles were the really driving, organizing structures out of which industrialism emerged, the two great systems that will dominate
the new information-rich system are finance and electronic entertainment on a worldwide scale.

How finance and electronic entertainment evolve will affect everything else. Technology is like water and follows the path of least resistance; they’re the path of least resistance.

“In the case of finance there are three things going on. The markets are becoming global, they interact, which drives globalization further, and they’re huge.
The newest numbers I’ve seen show that in 1986 international foreign exchange transactions reached $87 trillion. $87 trillion. Twenty-three times the U.S. Gross National Product.”

Brand: “What’s the history of that number?” I asked. A trillion is a million millions.

Schwartz: “Before the ’70s it was one, two, three trillion a year, max. It reached $65 trillion in 1985—double the figure for 1984. What happened was a combination of the international volatility of the dollar and the huge outflows of capital from industrialized countries after the first OPEC crisis.
Back when the dollar moved a tenth of a penny over three weeks, currency arbitrage was no game to play. But when the dollar moves three or four cents a day, and you’ve got a billion bucks here, five billion bucks there, there’s good reason to move money from Tokyo in the morning to Paris in the afternoon. You’re talking really serious money—tens of millions profit absolutely risk-free. Then that process fed on itself and started accelerating.”

The Washington Post reported in August 1986 about the daily volume of international money exchange transactions: in Tokyo $48 billion a day, New York $50 billion, London $90 billion. Those three markets are so placed that the sun never sets on the wheeling and dealing.
A New Yorker can stay up all night and lose his company’s shirt in Tokyo before breakfast. Until the early ’70s, national governments were able to assure fixed rates of exchange by being the major players in the game. Now the exchange rates float, changing from minute to minute. The Post concluded, “With the continuing integration of the world’s national economies, exchange rates have joined the list of things that nobody controls.”

It is a peculiar kind of economic activity.

Schwartz: “That $87 trillion is several times the Gross World Product. It’s not trade volumes, it’s not physical activity that is driving the value of currencies any longer; it’s this electronic money sloshing around the world in vast quantities. Trade is only about ten percent of that $87 trillion; it’s trivial. Movement of money itself is the game. The shift is fundamental.”

Brand: “How consequential is that?”

Schwartz: “Quite consequential.” Schwartz’ intensity increased another notch.

“One, just for the stability of the economy, it’s an extremely difficult system to manage. The fluidity and scale of the process are so large that the U.S., which is the biggest economy in the world, represents only five percent of it—not much leverage.

Secondly, because of the reversal of the relationship of exchange flows versus trade, the scope for domestic economic management is much less. A country can’t just adjust its domestic inflation rates to affect its exchange rate anymore.

And third, we don’t understand it.”

1. ”The Media Lab – Inventing the future at M.I.T.” by Stewart Brand 1987 ISBN 01400. 9701 5 Pages 230 – 233 [↩]