When I went to college in the late 1960s, there were no mobile phones, personal computers or Internet. Though I made far less money in those days, I had more spending power than today. Most of the time, I actually felt wealthy.
I had full-time broadcast jobs in the '60s and paid my own way through college. I even had enough left over to buy a brand new 1967 Chevy Camaro. Those were very good times, and never once did I think of not having enough money.
After graduation, when I moved into the workplace, I always had good jobs. I worked as a reporter for United Press International, Gannett Newspapers, Post-Newsweek Television and the Miami Herald. At each stop, my paycheck got higher.
THEN AND NOW
Today, in the fields of television and print journalism, the opposite situation exists. There are far fewer jobs that pay much less than ever before. Skilled workers have been decimated. News programming has been "dumbed down" for an audience with the attention span of a flea and an unwillingness to read.
When I worked at United Press International, for example, I wrote 2,000 word "think pieces" for Sunday newspapers. Today, I'm told, the maximum length of any UPI story is 300 words. That is very sad, indeed.
Now, with the economic problems of 2008, the lack of advertising revenue has sent all media on a further downward spiral. Television news has been transformed by point-n-shoot "content providers" using cheap camcorders. Newspapers are in rapid decline.
How did all this happen? One unique view I recently encountered in a New York Times op-ed was by Richard Dooling, author of "Rapture of the Geeks: When AI Outsmarts IQ." His op-ed on the economic crisis was titled "The Rise of the Machines."
Dooling writes of the Wall Street geeks, the quantitative analysts ("quants") and masters of "algo trading" who discovered "evolutionary algorithms" that allowed them to create vast empires of wealth by deriving the dependence structures of portfolio credit derivatives.
What was that? Well, that's precisely the problem. Few of us really understand what was done to our economy because so many "experts" use techno-geek language to describe it. Yet, it is fairly simple to understand.
These geniuses, said Dooling, fed a trillion dollars in subprime mortgage debt into supercomputers, added some derivatives, massaged the arrangements with computer algorithms and suddenly created $62 trillion in imaginary wealth.
Of course, all that money is locked up in computers. And because those computers are connected to the Internet and the money is swapped at lightning fast speeds by banks throughout the world, they became bigger than the people who ran them.
A DEAL WITH THE DEVIL
In the '60s, life was far simpler. A mortgage was offered directly by a bank. People met face-to-face to do a deal that everyone understood. It was a straightforward arrangement. When the computer arrived, however, it allowed the unlimited replication of information. Then people started to get creative. Soon we had unregulated replication of money.
Computer-generated financial instruments were created from other financial instruments. The arrival of the Internet allowed the swift trading of these instruments around the globe. What was in Hong Kong one second, was on Wall Street the next.
While we clearly understood the tangible value of the original mortgage we made at the bank, we lost track of it when the computer took over and merged it with many others. At some point, the mix of transactions got so complex that only the computer could derive the correlation structure of the financial instruments.
I, like so many of us, am only beginning to learn the full implications of what brought us to this place in our history. But it's clear to me that too many people offloaded their common sense into computer technology. In doing so, they made a deal with the devil.
In addition to having more money in my pocket, there was certain beauty and simplicity to the late 1960s. Sure, it was a socially turbulent time, but there was a clarity to transactions that is gone today.
In his excellent 1991 book, "In the Absence of the Sacred" (Sierra Club Books), author Jerry Mander warns that every technology is a two-edged sword. New technology, he wrote, is always introduced in its best light. All emphasis is on the benefits. During the sales pitch, the negative effects are masked. Only after the technology becomes embedded in our daily lives, do we begin to understand the tradeoffs we have made in embracing it.
THE DARK SIDE REVEALED
Our adoption of computing and the Internet is only now revealing its dark side. This is after we have become dependent on computers, the Internet, telephones, television and a myriad of appliances that are, in turn, all energy dependent on fossil fuels from foreign countries.
The financial crisis is a complex mix of human frailty. But it partially came about because we created an artificial world disconnected from all that is natural and real. Because so much wealth was created in the early years, we thought it would last forever. We forgot there is no free lunch.
Unfortunately, once we had fooled ourselves, it became increasingly difficult to accurately detect and measure what we were actually doing. Now, we have learned a good lesson about placing all our trust in machines.
They bit back.
Frank Beacham is an independent writer based in New York City. Visit his Web site at www.frankbeacham.com.
