Finance Home - Yahoo! - Help

[ Latest Headlines | Market Overview | News Alerts ]

7 Reasons

Related Quotes |

AAPL
GTW

16 11/16
19.04

-3/8
-0.08

delayed 20 mins - disclaimer

Monday December 4, 12:02 am Eastern Time
Forbes.com
Myth Of A New Economy Unravels
By John C. Dvorak

Have we been fooling ourselves with notions of a ``new'' economy? This economy is looking a lot like the old one as the stock market continues to slide downhill--and it's not the elections. The pertinent mechanisms are familiar to any student of economic history: Growth is slowing, profits are down, things need to be adjusted and I don't even want to mention the business cycle.

Which brings me to the letter that triggered this column. Jim Thompson wrote to rib me about my ``Death Of The Post PC Era'' column. To wit, ``After reading your article on 'Post PC,' I have decided to run right out and purchase some old economy stocks...This was the gist wasn't it?''

Here's the gist: Because the Internet appeared on the scene, the whole world does not have to change overnight. One pundit after another saw the Internet as the next industrial revolution. I see it as a continuation of the industrial revolution and ask the question, ``What does the Internet really do for us that couldn't be done before the Internet?''

There's the World Wide Web, which couldn't be done before the Internet. You had to go to the library and would never find as much material as you can on the Web unless you were holed up in the Library of Congress. But how many people need that much raw research power at their disposal? Only few of us need it all the time; even fewer need it some of the time. And a lot of people don't need it at all. Most can easily live without the Web.

The Internet has revolutionized mail by popularizing e-mail as a form of communication. Other changes such as universal classified ads, searches, large-scale auctions and effortless transborder marketing can be credited to the Internet. But again, what's really new here? You could do all these things without the Internet, but they would not be as cheap and accessible. And here's the key: The Internet became a cheap way to do a lot of things that would otherwise be expensive. In some ways, this is like the industrial revolution that created a system for manufacturing leveraged machines, which made things cheaper. The Internet leverages computers and networking.

With the Internet, commerce is even cheaper: You can expand your markets cheaper, and you can send millions of e-mail solicitations for absolutely nothing! Cheap, cheap, cheap. So how is this not a logical continuation of the original industrial revolution? It too was triggered by cheapness.

It would be nice if the great historian Arnold Toynbee, who coined the term ``industrial revolution,'' could have witnessed these past few years to pass some sort of judgment on this supposed revolution.

The computer, in some ways, was the last necessary piece of the puzzle to wrap up the industrial revolution, and the Internet is the final extension of the computer. The network is a peripheral to a computer and is useless without one.

The new economy is nothing more than the old economy because it is impossible to maintain high growth rates. This has happened before with old economy fads. Gateway (NYSE: GTW - news), Apple (NYSE: AAPL - news) and the other computer makers can sell a lot of computers, but people do not necessarily want to continually buy new machines. While it's nice to have a fast machine, individuals can quickly decide that they don't need a new machine if there is no compelling reason to upgrade. There hasn't been a compelling reason for years and the machines seem to be holding up.

This is not much different than the old economy companies, like automobile manufacturers. During eras when serious improvements were made either in technology or design, people bought about one new car per year. In the 1950s, it was common to trade in one model for the next year's model. But why would you do the same thing today if your Lexus is well made and looks pretty much like the newer models? This is a case of the old economy adjusting. The computer and networking scene is doing the same thing in the same way--adjusting.

So when Mr. Thompson yaks about my supporting old economy stocks, I have to say yes because much of this is all old economy. There is no new economy. Notions of the new economy were mere idealism that is now getting a lesson in reality.

Go to http://www.forbes.com/ to see all of our latest stories.

Email this story - Most-emailed articles - Most-viewed articles

More Quotes
and News:

Apple Computer Inc (NasdaqNM:AAPL - news)
Gateway Inc (NYSE:GTW - news)

Related News Categories: computer hardware, computers

Help

Copyright © 2000 Yahoo! Inc. All rights reserved.Privacy Policy - Terms of Service

Copyright 2000 Forbes.com . All rights reserved.
Questions or Comments?