Table Of ContentThe DIGITAL HAND
This page intentionally left blank
J A M E S W. C O R T A D A
The
DIGITAL
HAND
Volume II
How Computers
Changed the Work
of American Financial,
Telecommunications,
Media, and
Entertainment Industries
1
2006
1
OxfordUniversityPress,Inc.,publishesworksthatfurther
OxfordUniversity’sobjectiveofexcellence
inresearch,scholarship,andeducation.
Oxford NewYork
Auckland CapeTown DaresSalaam HongKong Karachi
KualaLumpur Madrid Melbourne MexicoCity Nairobi
NewDelhi Shanghai Taipei Toronto
Withofficesin
Argentina Austria Brazil Chile CzechRepublic France Greece
Guatemala Hungary Italy Japan Poland Portugal Singapore
SouthKorea Switzerland Thailand Turkey Ukraine Vietnam
Copyright(cid:1)2006byOxfordUniversityPress,Inc.
PublishedbyOxfordUniversityPress,Inc.
198MadisonAvenue,NewYork,NewYork10016
www.oup.com
OxfordisaregisteredtrademarkofOxfordUniversityPress
Allrightsreserved.Nopartofthispublicationmaybereproduced,
storedinaretrievalsystem,ortransmitted,inanyformorbyanymeans,
electronic,mechanical,photocopying,recording,orotherwise,
withoutthepriorpermissionofOxfordUniversityPress.
LibraryofCongressCataloging-in-PublicationData
Cortada,JamesW.
Thedigitalhand.HowcomputerschangedtheworkofAmericanfinancial,telecommunications,
media,andentertainmentindustries/JamesW.Cortada.
p.cm
Includesbibliographicalreferencesandindex.
ISBN–10:0–19–516587–X
ISBN–13:978–0–19–516587–6
1. Informationtechnology—Economicaspects—UnitedStates—Casestudies. 2. Technologicalinnovations—
Economicaspects—UnitedStates—Casestudies. 3. Business—Dataprocessing—Casestudies. I. Title:How
computerschangedtheworkofAmericanfinancial,telecommunications,media,andentertainment
industries. II. Title.
HC110.I55C672005
338'.064'0973—dc22 2004030363
9 8 7 6 5 4 3 2 1
PrintedintheUnitedStatesofAmerica
onacid-freepaper
Tothreegreateditorswhotaughtmehowtowritebooks,thenpublishedthem:
JamesSabin
PaulBecker
HerbAddison
This page intentionally left blank
PREFACE
Itisalwaysoftheutmostimportanceforustobethoroughlymastersofthe
economichistoryofthetime,thecountryortheindustry,sometimesevenof
theindividualfirminquestion,beforewedrawanyinferenceatallfromthe
behavioroftimeseries.
—JosephA.Schumpeter,1939
Thegreateconomistquotedabovepointsthewayforthesearchinunderstand-
inghowmoderneconomieswork.Hedidmorethanmosteconomiststocall
attention to the growing influence of technology on business and economic cir-
cumstances.Thisbooktakesoneprimarycollectionoftechnologies(computing)
andasecondaryset(telecommunications)andexploresthepathSchumpeterurged
ustotakebecauseuseofthesemethodschangedprofoundlyhowpeopledidtheir
daily work across the American economy in the second half of the twentieth
century.Computers,inparticular,influencedenormouslyhowcompanies,andthe
industriesinwhichtheyresided,functioned.Conversely,industriesplayedamuch
greater role in the deployment of computers in the economy than was thought
even just a few years ago. The implications of these findings are important both
for scholars of the modern American economy and for managers workingwithin
it. This book describes how computers were used in a variety of industries, how
they influenced companies and industries over time, and what, ultimately, were
thetechnological“sweetspots.”
Thisbookispartofalargerprojecttodocumenttheroleandeffectsofcom-
putingacrosstheAmericaneconomyoverthelatterpartofthetwentiethcentury.
Inthefirstvolume,TheDigitalHand:HowComputersChangedtheWorkofAmer-
icanManufacturing,Transportation,andRetailIndustries(2004),Iarguethatinfor-
mation technology (IT) profoundly influenced the daily activities of a large col-
lection of industries. I focus on the physical economy—that is to say, on the
manufacture, movement,andsaleofgoods. Inthecourseoflookingat16 indus-
tries,Idescribehowdigitaltechnologiessoprofoundlychangedthenatureofwork
viii Preface
that, in fact, a whole new style of doing business had emerged by the end of the
century.Yetitisastorynotcomplete,becauseitisstillunfoldingatthedawnof
the new century. In this second book, I turn our attention to other sectors that
havetraditionallyreliedmoreonsellinginformationratherthangoods,andthat
alsowereearlyadoptersofavarietyofdigitalandtelecommunicationtools.Asin
the earlier book, I contend that the influence of the digital hand and its effects
on economic activity were and are as important as management’sactionsonthe
economy and a natural extension of its role. Using the tools of the historian to
writeanarrativeaccount,Idemonstratethatprocessatworkinthedozenindus-
tries described in this book. For the techniques used, and the rationale behind
them,IencouragethereadertogotoAppendixAoftheearlierbook.
Mylong-termobjectiveistostudyenoughindustriestobeabletogeneralize,
withconfidence,abouttheroleofcomputingin80percentormoreoftheecon-
omy.Iintendtoaccomplishthistaskacrossthreebooks.Thefirstconcernedthe
physicaleconomy,thisonemoreoftheinformation-centeredportionoftheecon-
omy, and the third will look at the public sector (for example, government and
education). I am learning through research across all three books that there are
many common patterns of behavior that appear in scores of industries. But, just
asthefirstbookhadtostandonitsown,sotoomustthisonefortheindustriesit
describes.
Theindustriesselectedforthiscurrentvolume—fromthefinancial,telecom-
munications,mediaandentertainmentsectorsoftheeconomy—allshareseveral
commonfeaturesthatledtoanaturalgrouping.First,theindustriesareextensive
usersoftelephonictechnologies.Second,theyuseavarietyofcomputertechnol-
ogiesandhavedonesoforthebulkoftheperiodweareexamining.Third,their
centralproducts areinformation,data,andexperiences—notgoods(suchascars
or groceries)—and their primary inventory is information. Banks, for instance,
keep more data about dollars than actual cash on hand; radio stations transmit
informationover the airwaves; while a phone companymakes itpossibleforyou
and me to distribute both conversation and data. Fourth, they are increasingly
being seen as core pillars of what has come to be called the Information Age or
InformationSociety,soweneedtounderstandinsomedetailthemakeupofthose
pillars.
Fifth, and perhaps most subtly, these industries are not so much merging
together,asmanyhaveargued,astheyareincreasingtheinteractionsamongthem
by using digital technologies. If that trend continues, one can easily expect that
wewillhavemovedtoapostindustrialeconomy,onethatalsoincludestheman-
ufacture, distribution, and sale of goods, not just the movement of information.
As I demonstrated in the earlier volume and reinforce in this one, the emerging
postindustrialeconomyisnotonethatisreducingitsoutputofgoods.Rather,the
“new” economy continues to play out its historic role of providing the physical
necessities and wants of life at the same time that it also expands human inter-
actionsconsideredvitaltothefunctionsofaneconomyandasocietyatlarge.The
result is less a retreat from the role of the “old” economy than an evolution to a
new style of accomplishing its historic purposes. To be sure, how work was done
Preface ix
in2000differedinmanywaysfromhowitwasdonein1950,butbusinessagendas
hadnot.Banksstillhadcheckingaccounts,madeloans,worriedaboutbadcredit
risks, and served as the nation’s channel of distribution for cash from the U.S.
government to the public at large. Insurance companies still sold insurance and
madeprofits.Radioandtelevisionstationsstillinformedandentertained.
Asintheearlierbook,Ilookathowcomputerswereusedinspecificindustries
overthelasthalfofthetwentiethcentury,againfocusingontheAmericanecon-
omysinceitwastheearliestadopterofthecomputer.Ilookathowmanagement
cametousecomputersandtheinfluencethecomputershadontheindustries.To
demonstratehowprofoundlycomputersaffectedthenatureofwork,Idiscusshow
applicationswereextensivelydeployedwithinindustriesandsubsequentlybrought
aboutadoptionsorchangesattheindustryandfirmlevels.
A subtext of this book is the lack of a computer revolution and indeed the
digitalevolutionthatoccurred.Inoneindustryafteranother,firmsandtheirman-
agementteamsincrementallyadoptedcomputers;overtime,theaccumulateduses
andtransformationsbroughtaboutbythesemillionsofindividualadoptionscon-
stituted a metamorphosis so great that one could easily jump to the conclusion
that a revolution had occurred. But the insight about how the change occurred
has much to teach us about how to embrace a newtechnology and how,infact,
managersandtheirfirmsandindustrieschangeovertime.Thus,wecanbeginto
movefromgeneralitiesandhypetoamoresolidlygroundedsetofoperatingprin-
ciplesandinsightsaboutchange,innovation,andtransformationsinthemodern
economyatthreelevels:firm,industry,andnationaleconomy.
The case for looking at the adoption of the computer on an industry-by-
industrybasiswasexplainedintheearlierbook.Tosummarize:companieslooked
to their industry’s publications, conferences, members, and competitors to deter-
mine how they should use computers and other resources. These other resources
included management practices and changes in government regulations,because
technology by itself was never all-pervasive, operating in some abstract way, but
rather part of a larger mosaic of activities and influences that affectedindustries,
individuals,andthetechnologiesthemselves.Inturn,activitieswithinindustries
did influence the attitudes of individuals and firms, who then influenced their
colleagues and competitors. Some uses of computers were also unique to their
industries, as happened with scanning in retail, ATMs in banking, and telecom-
munications in the telephone industry. To get down to the level of specificity
neededinordertounderstandmorepreciselyhowcomputersaffectedtheAmer-
ican economy and either helped or hurt its enormous success during the half
century,weneedtolookatcomputinginspecificindustries.Thatiswhythebulk
of this book is a collection of industry overviews with descriptions of how they
used computers. I consider this exercise an essential first step—but only a first
step—towardfulfillingSchumpeter’sdictate.
In the earlier volume, I used the prism of digital technologies, focusing on
howthesewereusedovertime,toshedlightonhowtheworkoftheU.S.economy
evolved.Mostusesofdigitaltechnologies—thecomputerchipforinstance—were
intheformsofcomputersandtelecommunications.Theseuseswerelargelybased
