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Steve Jobs and the Democratization of Technology

I am old enough to remember when a computer was something owned by a corporation or a university and filled a huge, specially constructed room. I did my college thesis using one of those “mainframes” to tabulate punch cards that contained data, which I inputted through a giant typewriter.

Then came the Apple II, a 1 MHz computer that had 4k of RAM, recorded data onto an audiocassette tape – later replaced by a 51/4 inch floppy disk drive. When it went on sale in 1977, it cost $1298. With some trepidation about potentially undermining its mainframe sales to big business, IBM hurried to catch up with Apple, introducing its first personal computer in 1981. The Apple II was followed by the Macintosh in 1984. Quickly the personal computer found its way into the homes and offices of hundreds of millions of Americans, and later, through the iPhone, into their pockets.

Much will be said over the next few days about how Steve Jobs revolutionized the entertainment business. And he did, indeed.

But consider the impact his vision of a personal computer has made in placing the power of technology into the hands of the People. I wrote Proposition 103 on a Mac. I printed out campaign leaflets out an Apple LaserWriter, a $4000 printer that let you change the type style and made what I wrote look like it was printed by a professional press.

Today, as Americans assemble to protest our economic plight and the politicians’ fealty to powerful corporate interests, they access unfiltered information and communicate freely with each other through the internet and social networks that could not exist but for the democratization of computer technology pioneered by Steve Jobs.

Innovation Just Isn't What It Used To Be

When Wall Street wants to get out the big intellectual artillery in the argument against strong financial reform, they haul out innovation.

Regulation will strangle innovation, and we can’t have that, the financial titans contend. Innovation is the strength of America, without it we will lose our competitiveness, yadda yadda yadda.

But over the past several decades financial innovation has focused too much on mathematical models and not enough on a vision of improving the country and people’s lives.

Selling mortgages with exploding balloon payments doesn’t qualify as innovation; it’s a cruel trap.

The recent version of financial innovation, complex investments and gambling vehicles like derivatives and credit default swaps, no doubt made many bankers wildly rich, but these “weapons of mass of financial destruction,” as Warren Buffet labeled them back in 2003, also planted hidden, little-understood land mines of risk that helped create the financial crisis when they blew up.

It’s no longer just the pitchforks that are questioning the value of these innovations. Paul Volcker, the former Fed chief born again as the lone voice for meaningful financial reform in the Obama administration, recently said the only modern innovation that brought real benefit to people was the ATM card.

And the financing of innovation in the rest of the economy isn’t faring any better.

A couple of top economists, including a Nobel Prize winner, weighed in recently with a scathing view of the financial system in the Harvard Business Review.

Edmund S. Phelps (the 2006 economics Nobel winner) and Leo M. Tilman, both of Columbia University, wrote in the January issue [no link]: “The current financial system is choking off funds for innovation...Outdated accounting conventions and inadequate disclosures make it impossible to evaluate the business models and risks of financial firms. Excessive resources are allocated to proprietary trading, to lending to overleveraged consumers, to regulatory arbitrage and to low-value-added financial engineering. Financing the development of innovation takes a back seat.”

To finance opportunities in clean and nanotechnology that the current financial system is ill equipped to serve, the authors propose a government-sponsored bank of innovation.

The bank bailouts have no doubt soured people on the notion of the government in the banking business and rightly so.

But this hasn’t always been the case.

It’s worth remembering that the greatest financial innovation of the past 70 years was a government-sponsored program called the G.I. bill.

I heard about the G.I. bill growing up because it financed my dad’s education after he returned from World War II. Many others got help with home loans.

Ed Humes, an author and former Pulitzer Prize winning investigative newspaper reporter, has written a splendid account of the G.I. bill, “Over Here.” It captures how individual lives as well as the entire nation was shaped by the ambitious program.

The idea of a massive program to help veterans was first articulated by FDR, in part to prevent a reoccurrence of the bitter 1932 Bonus March, when angry World War I veterans and their families descended on Washington, D.C. to demand promised benefits. The government response was a fiasco – soldiers were ordered to fire on the persistent veterans. Nearly 10,000 were driven from the veterans’ encampment; two babies died. The resulting stink helped Roosevelt defeat the sitting president, Herbert Hoover.

I spoke with Humes about the history behind the G.I. bill.

The proposal faced stiff opposition from the financial industry and the education community.

“They argued that the average Joe returning from World War II was capable of being neither a college student nor a homeowner. The bill was basically rammed through over their objections, because of a combination of altruism and fear.”

It didn’t hurt that the bill was created by the American Legion, a conservative veterans’ group.

The G.I. bill was an overwhelming success, not only for the veterans but the college system, the building industry (it helped create the suburbs) the economy at large and the banking industry as well (it created the modern mortgage industry). “For every dollar spent,” Humes said, “seven was returned to the economy.”

Humes draws a direct connection from the G.I. bill to today’s bailouts. “They had a dead housing market, it had never recovered from the Depression. But did they throw money at the banks? No. They encouraged people to buy homes.”

The G.I. bill shows what’s possible when those who are governing possess large vision, heart, will, persistence – and fear. No mathematical model can come close.

Derivatives / Martin Column - 03/03/2010

Bad Government

In his weekly address last Saturday, President Obama said, “What’s being tested here is not just our ability to solve this one problem, but our ability to solve any problem.” Obama’s speech was about health care reform, but his point goes to the heart of the debate underway in this country – a debate that the Tea Party movement has given a sharp edge.

American’s have lost their confidence in the basic institutions of our democracy. It’s not just the President’s rating that is down in the polls, it’s Congress’s, the United States Supreme Court, even the college system.

There is more than ample justification for this stark collapse of trust. As I wrote last summer, I believe it all begins with the crash of the Money Industry after years of deregulation by federal officials who, quite simply, sold out – and then showered billions of taxpayer dollars to save the speculators while the rest of the economy, along with millions of people’s jobs and savings, went into the tank. Even now, the Wall Street execs whose greed and speculation caused the crash continue to call the shots in D.C.

After that pitiful performance by our government, who can blame people for distrusting Washington’s plan to fix the health care system?

Lately I’ve been pondering two other disasters that might have been averted had government done its job.

An appendix (PDF) to the 2004 report of the 9/11 Commission describes in agonizing detail how our government was unable to mount a defense of the nation that day despite trillions of dollars spent on defense and the military in preceding years. That morning, there were only fourteen jet fighters guarding the country. Flight controllers couldn’t connect the dots as the multiple hijackings unfolded; FAA officials failed to follow procedures to communicate with the military; scrambled fighters were too far away and sent to the wrong locations; the military never even knew how many or which commercial airplanes were involved until all four were down. A fateful order from the White House to shoot down any commercial planes that refused to land never even reached the fighter pilots who by then were flying combat cover over the East Coast.

On that horrible morning, it was only when individuals took matters into their own hands – the passengers of United 93 who fought the terrorists as their plane headed for a strike on he nation’s capitol, or an FAA manager who ignored protocols and unilaterally ordered all planes in the air to land – that more lives were spared.

Or, consider the case of Amy Bishop, the University of Alabama professor who shot six colleagues a few weeks ago. As rendered by the New York Times, her profile now, after the deed, reads like the description of “angry loner” we have grown familiar with from previous mass murders, but no one ever connected the dots of her obviously deranged life. In 1986, she killed her brother but claimed it was an accident and got off, perhaps due to political connections; in 1993, she was questioned in connection with a pipe bomb sent to one of her college professors; in 2002, she punched a women in the head at a House of Pancakes for taking the last booster seat.

What to do, then, about such profound failures by government? Do we follow the suggestion of Glenn Beck, who over the weekend blamed progressivism – the philosophy of engaged government championed by Theodore Roosevelt – for our nation’s ills?

I’m not one of those people who is offended by the eruption of angry Tea Party organizations around the country. To the contrary, the TP’rs are raising questions, pointing out problems and demanding answers from elected officials – just what an active citizenry is supposed to do.

But I disagree with their premise, which is that government is responsible for all that is wrong with our country, and that the solution therefore is a castrated federal government or no federal government at all.

That’s stupid.

We need police. We need the military. We also need a cop on the corporate beat in the executive suites of Wall Street. And we need rules and regulations to prevent health insurance companies from ripping us off or condemning us to death.

When our government institutions fail us, as they have, through incompetence and corruption, the answer is not to get rid of government, but to make it work better. How to do that? Read my next column.

Harvey Column / Outrage - 02/22/2010