Monday Note

Guess: which tool all of us use everyday was invented in the United States in 1947? The mobile telephone. A year later, a wireless telephone service became available in almost 100 cities and highway corridors. Most early adopters were truck drivers. Now, there are about 3.5 billion cellphones in service across the world, thanks to another invention, that very same year: the transistor — both coming from AT&T’s Bell Labs.

Were those times of great prosperity?  In fact, no. The first post-war recession started in November 1948 and lasted until October 1949, with GDP contracting by 0.5% and unemployment peaking at 7.9%. (To put these numbers in perspective let’s remember: the US GDP for Q4 2008 was down 6.2% compared to a year before and the unemployment rate is 8.1%).

Other examples? Take the laser. Today widely use in medicine and telecommunications, the laser was invented in 1958. Not a terrific year, either. In January of that year, the real growth rate of the American GDP was down 10.87 % from a year before and employment rate reached 7.4% in the middle of that year. But that bad year 1958 won’t deter Jack Kilby from creating the first integrated circuit at Texas Instruments; Kilby proved that resistors and capacitors could exist on the same piece of semiconductor material. Still in 1958, a company called NEC created Japan’s first electronic computer. Innovation in recession time is not tied to military supported cold war programs. Take DNA: it was discovered in 1953. For those who don’t remember, between October 1952 and October 1953, the US GDP fell by 6.31%.

You see where I’m going.  Innovation is recession-proof. Or, at least, it is not recession-sensitive.  Here is a brief timeline making that point:

In October 1969, the US GDP shows a decline of 1.9% versus a year before. That year, the number of patents granted in the USA is up by 14% (after a drop of 10% the year before). And, behold! 1969 is the year when the Arpanet, the Internet ancestor is created; it is publicly funded and subcontracted to academic research.

The Seventies see the first energy-caused recession with the oil shock of 1973.  Between November 1973 and March 1975, the US GDP shrinks severely:
Q1 1974: –3.47%
Q2 1974: +1.15%
Q3 1974: –3.87%
Q4 1974: –1.6%
Q4 1975: –4.7%

Unemployment reaches 9% in May 1975, two months after the downturn’s ‘technical’ end.

Bad times indeed. However, they come with the following technology breakthroughs
-    Bob Metcalfe invents the Ethernet (the network of your business).
-    The Xerox Palo Alto Research Center (PARC) introduces the Alto, a computer featuring the first graphic user interface with windows, menus, and mouse. Four years later, Steve Jobs tours Xerox PARC and “inhales” the features we later saw into the Lisa and the Macintosh.
-    DARPA — the Pentagon’s research agency — creates the TCP/IP protocol, which, today, remains the Internet’s foundation.
-    In genetics, too, innovation goes unaffected by the recession: 1973 sees major breakthroughs in recombining DNA.

Granted, the 1973-1974 recession was a mild one compared to the next one, the 1981-1982 contraction with the GDP going strongly negative: -4.9% in Q4 1981 and -6.4% in 1982.  During the two last months of 1982, unemployment climbed to 10.8% and stayed above the 10% level up until July 1983.

In 1981, ignoring the crisis, IBM introduces the first personal computer running the MS-DOS operating system designed by Microsoft. A year later, Cray sells the first XMP supercomputer to the defense and the oil industry beating a Boston company called Thinking Machines.  The latter company opens a new field in the supercomputing business with its massively parallel machines. Less gigantic but more popular, we have the Commodore 64 personal computer, launched in that dire year of 1982; the great C64 was unfortunately unable to run another child of bad times, the first commercial integrated program, Lotus 1-2-3, featuring a spreadsheet, a word-processor and a database function.

The last recession of the century and the ninth since the end of WWII will be a mild one. At its quarterly peak, on the Q4 1990, the US GDP shrunk by –3%. During that year, a British computer scientist named Tim Berners-Lee Created the World Wide Web by implementing the first HTTP connection on December 25, 1990.

How bad is the current recession versus the previous ones? Very bad in terms of job losses. After 14 months it shows an employment situation worse than in the nine previous recessions…

…. as jobs are slashed at a much higher pace than for the 81-82 recession:

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…but not as bas as in 1948:

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In terms of length, the 10 previous postwar recessions lasted from 6 months to 16 months, averaging about 10.5 months. This one started in the final months of 2007, is already beyond that.

What about innovation now? Well, there is no shortage of “next big things” in the pipe. Green tech, computer science, genomics will bring their share of breakthroughs. The list of candidates is too long. To get the idea in a rather entertaining way, just go to this abstract from the last TED Conference. There, biologist-futurist Juan Enriquez talks about the “ultimate reboot”, one where tech will eclipse the current crisis thanks to the engineering of cell, tissues and robots. Compelling.  —FF

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