Public-Interest Polling

The Lessons of Y2K

By Alan F. Kay,
April 14, 2007

2007, All Rights reserved

December 31, 1999, was a unique day in the history of the world. If, as many had feared, Y2K flummoxed computers produced market failures, securities markets would have collapsed like dominoes as businesses attempted to get through the day. In the US, aware of this wave of failures, you would have had many night time hours, perhaps all night, to think through and execute a revision of your portfolio as soon as the US markets opened that could have proved very rewarding. But collapsing securities markets did not happen or more accurately, as we will see, were unnoticed and dismissed by the media. The opportunity for almost sure-fire portfolio revision never happened

Things that did happen could have been predicted with close to absolute certainty if the key signs were noted, evaluated, and put together the way a logical and brilliant detective, like Sherlock Holmes, might do. What this would have revealed, now obvious in hindsight, is that within a few months after Y2K, as explained later, some, perhaps many, would have been in position to make a fortune and others could have avoided disasters. No one in fact put together the whole picture and knew what was happening as it happened.

The first thing that happened, obvious in hindsight, was 12/31/1999 was not going to be a New Year's eve celebration like any previous New Year's eve. The mainstream media saw the opportunity to extend the celebration almost a full day by sending reporters to each time zone an hour before midnight. Each hour the media had to switch from one time zone to the next to keep up with the event nature's way, uncontrolled by humans. If a city in a time zone had its lights on about midnight, it could get on the air for an hour with global media coverage generating a travel and tourist coup worth a small fortune. Sidney, Australia with the exciting panorama of its harbor sprinkled with festivities and its glamorous opera house started the world-wide New Year's holiday with a bang. Then moving on at natures pace, if the lights were not on anywhere in a time zone, the media could skip ahead and arrive an hour earlier, a bonanza for the next zone. You can't put on an outdoor TV show without lights. If the lights were there, the media came and the global audience saw it. In that way time zone by time zone the world saw only successes. Failures were in the dark. No TV producer will waste time showing a black screen.

Reporters had trouble filling a full hour. They noted how glorious and beautiful the fully lit night scenery was, but what else? This was not the Olympics. It was not some foreign natural disaster. There were no events or disaster scenes to cover. Reporters are selected and groomed to be glib, well-spoken, and unflappable. They were certainly not nerds or geeks who might have said something about what had been done to fix Y2K. They were on location with little hard information and could not resist filling time by ridiculing nerds and geeks and assuming lights-on meant Y2K was not a problem. Most time zones around midnight had lighting somewhere in its zone. The net impression upon the global audience was that there were no Y2K failures.

But there were real Y2K failures. Not as bad as they might have been, but here are a couple of mind boggling facts. The US overall spent about a hundred billion dollars fixing computers to handle years with 4 digits. The rest of the world, not as computerized as the US, spent another 100 billion. Reporters seemed not even to know the huge cost of Y2K. Since cameramen and videographers were unprepared with visuals, although it could have been a great story if true, reporters were far from being able to say that the money was wasted.

What about other media? Radio had nothing to say. They were out of it. TV took the lead and had nothing to tell the public. In the next day or two, the papers were so pleased that the US survived Y2K that press media took the same approach as radio and TV. Y2K was a non-event. The nerds and geeks were overblown. Happy New Year everybody.

Here is what really happened. Before 12/31/1999 a lot of computers were fixed by the geeks. A lot of data that normally would be sent from one computer to others did not arrive or arrived with errors that had to be made up by work-arounds. A lot of data was of this nature -- one person, not receiving a payment from another, arranged for it to be made later -- easy enough to do if these instances were not numerous. But perhaps the most important fact, that few noticed, a lot of companies bought in increasing numbers through 1999 new computers built to eliminate Y2K limitations. Indeed 1999 was a banner year for new computer sales that did not peak exactly at year end but one quarter after. At that point with computer sales headed toward the sky almost everybody thought that the dot.com boom was going to last forever and for a few months after the March 2000 peak, the drop in computer sales was not large. It was dismissed as just "a little reversal". Thereafter the dot.com bust followed the boom with a vengeance.

Did Y2K cause the bust? No one could say that. But the fact that the bust occurred when it did, in early 2000 when the successful resolution of the Y2K threat had raised the optimism of the IT industry, suggests that the post Y2K era optimism only enhanced the optimism for dot.com's that was already probably excessive. What is reasonable to say is that the dot.com bust would probably have occurred later than it did, and possibly, though not likely, it might not have happened at all. What a difference to the world if the dot.com's did not crash but had a soft landing!

Even more optimistic points could be made based on the possibilities for future Y2K problems. Who was going to worry about the same kind of problem as Y2K, if there wouldn't be another one until a five digit year was needed in Y10K. That was, of course, a joke. Even Y10K would not be significant if it was only as badly handled by our descendents as we handled it in 1999. But a good joke also adds to optimism.

In addition to the media failure that might have made the dot.com bust into a soft landing, there is an even more important lesson of Y2K that has been forgotten. Y2K was the first challenge to the whole world that had to be handled by some cooperation, and it succeeded. It should have been understood as a successful precursor to all the cascading disasters caused by humans that now require long term, priority cooperation if our species is to survive.