The War Between Optimism and Pessimism
Take a look at one of the cover stories of the Life magazine below. It reads, “Automation’s really here; jobs go scarce. Point of no return for everybody.” The edition was published on July 19, 1963, shortly before President John F. Kennedy was assassinated.
Today, if you walk past a magazine rack, peruse the Internet, listen to the radio or cocktail party conversations, you are likely to see and hear the same sentiments expressed as those in the magazine. And yet, immediately after the issue appeared, the United States entered a period of unprecedented job growth lasting almost 50 years. Tens of millions of good—no, make that excellent!—jobs were created. However, just prior to this jobs boom, the country was intensely fearful about the future.
Is that how we roll? I’m afraid so. The optimists and pessimists were at war, and that war continues.
The reporters who wrote the article talked to all the right people. They interviewed shop-floor workers as well as union stewards and leaders, captains of industry, economists, politicians, and academics. With 9 million weekly subscribers at its height (more people than view any news show on CNN, Fox, MSNBC, or CNBC), Life and its reporters had access to virtually anyone in the world. Yet they produced a ballyhooed story that missed one of the most important and longest-running economic trends, while pushing the needle on the emotional scale to somewhere between intense worry and outright fear. Life’s bias here was not political, but it was staunchly pessimistic.
It is strange that no one foresaw the events that actually occurred. Instead, people were fixated on the march of computers onto the shop floor, thinking of them as an invading, alien army. Specifically, the writers at Life focused on a single machine—the Milwaukee-Matic—made by a now-defunct U.S. company. This gray steel behemoth, which could be customized to do varied tasks, was taller than most of its operators and controlled by a primitive computer. Its job was to cut and shape metal into irregular forms, something that previously could only be done by hand.
In some quarters, the reaction to this machine was vehement. One unidentified union official told a Life reporter, “There is now no need for 40% of our toolmakers, 50% of our machine operators. Without a shorter workweek, 60% of our [union] members will be out of a job.” Talk about a negative response to a new idea.
The Milwaukee-Matic milling machine, which stoked fears about displacing workers.
A few years after the article appeared, when I was starting college, I took a summer job working for my uncle, who owned a store that sold new and used industrial machines, tools, and parts. The store was in Southern California, not far from one of Lockheed’s manufacturing facilities. Almost all of my uncle’s customers worked in the aerospace industry.
One day, my uncle handed me a box and told me a customer needed it as soon as possible. He told me to take the van and deliver the package. I looked at a map of the city—this was long before GPS—and realized I was not going to Lockheed or Rocketdyne, or any of the big companies near my uncle’s store. Instead, I was headed west, to a residential neighborhood nestled into the dry, brown, fire-prone foothills of Los Angeles.
I threaded my way around the Burbank airport and past one housing tract after another. Finally, I found the address stenciled on the side of a mailbox in front of a small house with a flat roof covered with pebbles. A small, handwritten sign behind the screen door said, “Deliveries in rear.” I walked to the rear of the house, where I saw a garage with an “Always Open,” sign on the side door. It was the archetypical California garage—like the ones in which HP and Apple were started.
I will never forget what I saw when I entered the garage. Inside the brightly lit, un-airconditioned space was a drab, gray, early-model Milwaukee-Matic milling machine in operation. I could hear the high-pitched whine of its big electric motor and the sound of jets of water spraying the tool bits to keep them from melting from the friction. I’m guessing, but the block of metal the machine was cutting made it look like the operator was making some type of intricate hinge.
When I entered the garage, I was greeted by a middle-aged woman whom my uncle later told me was the machine operator’s wife and bookkeeper. She opened the box I brought, checked the carbon-steel parts inside, smiled, unlocked a metal box marked “Petty cash,” and handed me a tip. “Tell your uncle I’ll send him the check,” she said. The woman’s husband, the machine operator, was standing with his back toward me, studying the switches and dials on the Milwaukee-Matic’s console.
I made deliveries to this two-person shop that summer and the next. I learned from my uncle that the Milwaukee-Matic’s operator—whom I never actually talked to—borrowed money against his house and from friends to buy a used machine after he was fired from a big aerospace firm. Shortly afterward, he and his wife started the company and won a contract to make a series of small parts for rockets, aircraft, and missiles. Aerospace was made up of big companies like Boeing, Northrup and Grumman, but it was also a cottage industry with lots of tiny, owner-operated businesses like this one.
I don’t remember the name of the little company. But none of the economists, union leaders, industrialists, or professors who were quoted in the Life magazine story mentioned anything about an individual purchasing a Milwaukee-Matic because he or she saw an opportunity to own a piece of the future. Nor did the reporters appear to talk to anyone who was fired and then started a business. Instead, the article focused on grim circumstances—unemployed workers looking for work.
Economic forecasters and others who try to understand the future are handicapped by thinking tomorrow will be like today. They are also handicapped if they have a negative bias because new technologies are often accompanied by opportunities that are missed when people focus exclusively on threats.
America’s Economic Standing
I found this out the hard way. In March 2014 I published a book (Unleashing the Second American Century: Four Forces for Economic Dominance) arguing the United States will soon enter a period of exceptionally strong growth due to changes in the economy and the introduction of new technologies. Technologically, since the Great Recession, we’ve gone from being the world’s biggest importer of energy to the world’s largest producer of energy. We’ve also increased our lead in manufacturing—we are the most productive country in the world—while remaining the pacesetter in creativity and innovation.
These changes are powerful. Transforming the United States from energy importer to energy exporter means $200 billion to $300 billion a year will stay in the United States instead of going to other countries. In addition, since the recession, real estate prices have recovered and savings rates have soared. While this was happening, household debt fell dramatically in proportion to GDP. It’s difficult to see these facts as anything but good news. And yet...
I expected this and the rest of my analysis to be greeted warmly, even enthusiastically. I was confident my data were correct and my analysis sound. And, since so many confidence surveys indicate Americans were in something of a funk regarding their own future prospects, I thought my information might cheer them up. But I was wrong. My optimistic words were greeted with as much warmth as a Milwaukee-Matic machine at a ‘60s union convention.
What was really odd was that none of the reviewers or interviewers disputed my facts or took issue with my overall analysis. They just didn’t like my conclusion—that the United States would be a more attractive place to invest than emerging market countries, including China.
One reviewer at a major national newspaper that focuses on the economy and business really took me to task. Like the others, he was OK with my numbers. In fact, he praised them. But he, like others, thought my bullishness about America was wishful thinking.
I never met the reviewer, but I sent him an email. I did it to find out why we didn’t see eye to eye even though we agreed on the numbers. “If you accept my numbers, why not my conclusion?” I asked.
“Our time has passed,” he wrote in response. “That’s just the way it goes. It’s China’s turn now. We’ve lost our edge. Our kids don’t have the same kind of fire we had and we don’t have the kind of fire our parents had. We’re on a downward facing slope.”
Really? All 320 million of us are on that same slope?
I argued with him in a series of emails which didn’t end well. In his last email, which I deleted out of frustration, he said something like: “Writing to you is hopeless. You just don’t understand.”
I guess I don’t. But what I do understand is that deep down, when it comes to the rift between optimists and pessimists, most Americans are like my book reviewer. They only see and hear gloom.
Let me explain why that matters. The husband-and-wife team that bought their own Milwaukee-Matic managed to stay in business, my uncle told me. They didn’t build a company like Apple, or SpaceX, or Gulfstream. They weren’t superstars. They ran a small business that allowed them to feed their family and make their mortgage payments. It gave them the ability to send their kids to college, and it helped them retain control over their lives even when the economy caught a cold.
They were able to stay in business not because they were part of the Greatest Generation or because they were geniuses. Rather, they saw opportunities, which they greeted with hope and seized, while others saw only ruin. And, while they may have been fearful as they watched each expensive component of their Milwaukee-Matic being delivered to the garage, they did not allow fear to stop them.
I doubt optimism brings anyone closer to any ultimate truth, and it doesn’t necessarily go hand in hand with competence. What it does is help you see opportunities. Today, it seems, most Americans aren’t very optimistic. When it’s survey time and they are asked to circle a number between 1 and 5 to indicate how much confidence they have in the economy, they’re mostly circling 5, when 5 stands for “Not much.”
I keep my July 19, 1963, copy of Life magazine on a table next to my desk. Even though it is yellowing and slowly disintegrating, I continue to display it. One reason is to remind me how easy it is to be wrong about the future. Another is to help me remember that America’s bias is not toward the positive, as we like to tell ourselves. It’s the opposite. But I also keep it there to help me remember that while the Milwaukee-Matic sent shivers through the spines of people reading that magazine, there were at least a few sensible souls who saw the machine for what it was—a tool that could help us uncover opportunity. My aging copy of Life reminds me that it’s those people we should be listening to.