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Eureka: A brief history of the 21st century economy
by Jay Gutman
2018-09-13 06:33:11
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In the 1980s and 1990s, many had predicted that Japan would surpass the United States because Japan embraced technology more openly than the US. Indeed, in the early 1990s most Japanese offices had computers when American and European companies preferred pen and pencil. Japan also invented video games and teletext among many other whacky Japanese innovations. People were worried the Asian tigers and Japan would be the future economic giants, and that the US and Europe would struggle to catch up. No one really predicted that India and China would awaken, and people believed that the third world was headed to under-development rather than development.

So here's what happened next:

1995-2001: US tech boom.

2101_400When people thought the United States were economically down and out because they lacked technology, Mr. Bill Gates came up with Windows 3.1 and the United States “invented” the World Wide Web. Oddly enough, Japan struggled to embrace the World Wide Web and windows and thought those would distract their busy employees.

The World Wide Web created few direct jobs, but many, many indirect jobs. The stock market embraced what was known as the “tech boom” or investment in world wide web-related ventures. But such ventures were often not very profitable, lost money, failed to make profits, people sold their shares and the whole thing went bust.

2001: Tech bust and 9/11

When the Asian market recovered from a disastrous financial crisis, the US faced its own financial crisis, with many tech firms going bust and 9/11 further plunging the economy further down. Europe was getting ready to adopt the Euro, and the Middle East was still in crisis because oil prices dipped in the 1990s. The African economy was the size of the economy of Belgium, and Latin America had its 9/11 related crisis, Argentina financially collapsed and other Latin American economies were on the verge of financial collapse. The problem for Latin America was many countries would take loans, party with their loans, and then ask for other loans and pay the loans back with other loans. When the American and Asian economies collapsed, and Europe was in rigor mode preparing for the Euro, Latin America no longer found ways to repay loans. They had a good run.

2002-2007: Because we all need real estate

With most countries around the world adopting some form of rent control, no country really thought about investing in real estate. After all you could only charge your tenants that much rent, meaning few people saw any point in investing in real estate. But around the new millennium, global economists came to the conclusion that rent control meant less investment in real estate and did not help tenants because it made finding apartments harder. So most countries, including Europe, Asia and North America, got rid of rent control, and everyone was hoping to make their millions in real estate. Build baby build, disco inferno. Real estate projects were everywhere, prices were going up, and ghost towns were emerging everywhere, but there was optimism and people could see ghost towns becoming hustling and bustling cities. Then real estate developers waited and waited and waited.

Then there was the oil boom. China's economy was booming and needed oil, India's economy was booming and needed oil, and more technology meant more energy consumption which meant more oil. A middle class emerged, a mix of real estate developers and hi-tech professionals who were using a lot of cars and energy. With Iraq no longer supplying oil and demand for oil booming, oil producers felt they might no longer be able to meet the supply and decided to quadruple oil prices.

Tech boom. Now the tech industry learned its lesson and decided to focus on software rather than two-dimensional online stores and news websites. People in the tech valleys were wondering, what kind of software would the 9 to 5 office worker or student need? There was Google. There was E-Bay. Then there was Friendster. There was high-five. There was MySpace. There was Facebook. There was YouTube. And many other useful and not so useful websites that made, in some case lost, millions. Remember Lycos and AltaVista and Caramail and ICQ and all those other sites. 

2008-2015 Oil boom, real estate bust, tech boom, leisure industry boom and bust

Of course those who built ghost towns and were hoping people would queue to buy housing there were dead wrong. People never came. People bought houses in ghost towns, in some cases in small towns, at inflated prices, and the prices crashed. In ghost towns, housing lost in some cases 99% of their value. If you bought a house in a ghost town for 100,000 dollars, you could only hope to sell it for 1,000 dollars, no one would pay more for a house in a ghost town. In smaller towns, if you bought a house for 100,000 dollars, you could probably get 10,000 dollars if you sold it, as no one really wants to move to a small town. Of course you paid 100,000 because the real estate developer promised the town would soon look like LA or NYC. Just didn't happen.

Oil prices kept going up because Iran was technically banned from exporting oil, Iraq had trouble selling oil and Libya collapsed. That meant supply of oil was dangerously low, and countries like China and India want more and more. The global population was also booming, and Africa, who’s GDP was once the size of that of Belgium, was growing at a rapid pace as well.

Tech boom. Technology was no longer just two-dimensional, now software companies were also providing all sorts of high-tech services, be it in security, data entry, statistics, advertising, communication, and have a “your wish is my command” “ask me anything and I'll make it for you” kind of attitude. Smartphones were invented, and became mainstream, so you no longer needed to be behind a computer to be connected. People are now really connected 24/7 and there is no resting from being connected. That meant the tech industry was constantly busy.

Another area that started booming: the leisure industry. Parks, theme parks, restaurants, game rooms, karaoke, board game salons, darts tournament clubs, bowling alleys, pubs, craft beer pubs, fine wine pubs, wine and cheese pubs, wine and French cheese pubs, whiskey pubs and all kinds of other leisure centers. YouTube channels. YouTube music channels. YouTube entertainment channels. Netflix. But leisure centers also have their bubble right? And their bubble can burst too right?

2015-Present: oil bust, ghost towns, tech and security boom, retail industry boom, leisure industry boom and bust

Oil bust: all good things come to an end. People found ways to sell Libyan and Iraqi oil, Iran was allowed to sell oil, and China and India no longer needed as much oil as they used to. So demand was lower and supply was much higher, and oil prices crashed. They are going up with the Iranians no longer allowed to sell oil, but the global demand is lower.

Ghost towns: no one really knows what to do with those ghost towns. Real estate prices are prohibitively expensive, people tend to flock in areas where there is a lot of fun going on, meaning a select number of districts have high real estate demands, meaning people have to fight for apartments in crowded neighborhoods, even if it means paying crazy, crazy sums to get those apartments. In a way that makes sense, because people want to live where all the jobs are.

Tech and security boom: people are connected 24/7, and a small number of established companies are now dominating the market. Tech kind of works like Tennis, first you had a few big names and many medium names and then a few small names, now you have three big names and the rest are nobodies. In tech it's the same thing, you either make a product that will appeal to the big names, or you are a nobody. Kind of like in tennis, you have to accept that you are only playing to validate Federer, Nadal, Djokovic, Serena Williams and Sharapova.

Leisure industry boom and bust: unlike the tech industry, no one really left a lasting mark in the leisure industry. No pub or restaurant became THE franchise, no karaoke became a landmark, Netflix and YouTube are steady but those who provide content to YouTube and Netflix are more likely to bust than boom. Travel was affected by security concerns, as news of several terrorist attacks around the world means people would rather stay caution.

Retail industry boom: The last three years have been tough, but retailers have mostly found their mark. Like in the tech industry, there are a few names in the retail industry, and the other ones are playing to lose against the big names, or work for the big names.

Industry is on its way back: one unlikely comeback was the comeback of small and medium industry. Steel, coal, construction, food processing, textiles, cars, ships. The big names are now competing with smaller names, and small names join the crowd every day.  

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