How We Got Here : A Slightly Irreverent History of Technology and Markets

276 Pages·2005·1.16 MB·English

by  Andy Kessler

How We Got Here
A Silicon Valley and Wall Street Primer
A Slightly Irreverent History of
Technology and Markets
Andy Kessler
For my Dad,
who sparked my interest in technology
Contents
foreward v
Logic and Memory 1
PART 1: THE INDUSTRIAL REVOLUTION 9
Cannons to Steam 11
Textiles 29
Positively Electric 39
Transportation Elasticity, Sea and Rail 46
PART 2: EARLY CAPITAL MARKETS 63
Funding British Trade 65
Capital Markets and Bubbles 73
Fool’s Gold 82
PART 3: COMPONENTS NEEDED FOR COMPUTING 101
Communications 103
Power Generation 109
PART 4: DIGITAL COMPUTERS 115
Ballistics, Codes and Bombs 117
Transistors and Integrated Circuits Provide Scale 136
Software and Networks 152
GPS 181
iv CONTENTS
PART 5: MODERN CAPITAL MARKETS 187
Modern Gold 189
The Business of Wall Street 194
Insurance 210
The Modern Stock Market 222
ENIAC Press Release 243
Bibliography 247
Index 249
About the Author
Other Books by Andy Kessler
Credits
Cover
Copyright
About the Publisher
Foreword
Talk about twisty-turny paths. I started life as an electrical
engineer and ended up running a billion-dollar hedge fund
on Wall Street. Like a pinball bouncing off of bumpers, I’ve
been a chip designer, programmer, Wall Street analyst,
investment banker, magazine columnist, venture capitalist,
op-ed writer, hedge fund manager and even a book author.
My mother thinks I can’t hold a job. Friends suggest I know
very little about everything and a lot about nothing. That’s
hard to argue with. But throughout it all, I learned over time
to live by five simple creeds:
1. Lower prices drive wealth
2. Intelligence moves out to the edge of the network
3. Horizontal beats vertical
4. Capital sloshes around seeking its highest return
5. The military drives commerce and vice versa
I’m not entirely sure how I came up with this list, but it
has worked. I’ve invested by it and have read and under-
stood the news by it. It has helped explain the unexplainable
and has helped me peer into the fog of the future.
I sat down with two different groups of people and tried
to explain why these creeds are so valuable. The first group,
vi FOREWORD
engineering students who lived by math and science, were
confused over how technology leads to business, even though
advancing technology has driven and continues to drive most
everything. The next group, business school students, was
combative; they suggested that business and management
skills trump economics. Maybe so.
So both groups were equally skeptical, and barraged me
with questions like:
“How do you know they work?”
“How come we’ve never heard of these things?”
“Can you prove it?”
“What if you’re wrong?”
“You’re just making this up, right?”
To explain in 20 minutes what took 20 years to seep
into my sinews, I’d have to walk them through the history
of the computer industry, from the transition from
telegraphs to gigabit fiber optic networks and show how we
moved from the Industrial Revolution to an intellectual
property economy. And that’s the easy stuff. Add money,
and a diatribe turns into a dissertation. I’d have to explain
how stock markets came into being, and insurance and the
follies of gold standards. And then somewhere in this tale
would have to be the link between military doctrine and
commerce.
I needed to answer a few too many burning questions.
What is the history of the computer industry? Of the
communications industry? Of the Internet?
Why does the U.S. dominate these businesses?
Didn’t the British rule the last big cycle? What happened
to them?
Why do we have money? What is it backed by? What
was the gold standard all about? Do we still have a gold
standard?
FOREWORD vii
How did the stock market come into being and what is
it for? Aren’t banks good enough?
Who wins—money or ideas?
Does the military get its technology from industry or the
other way around? Did anything besides Velcro and Tang
come out of the Space Program?
Why does the U.S. have any industrial businesses left?
There are too many questions to answer. So instead, I
wrote this primer. Enjoy.