24 min
🦁 My chat (+transcript) with investment strategist Ed Yardeni on his optimism for a Roaring 2020s Faster, Please! — The Podcast
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- Technology
As I often remind subscribers to Faster, Please!, predictions are hard, especially about the future. The economic boom of the 1990s came as a surprise to most economists. Equally surprising was that it ended so soon. Neither of these events caught Ed Yardeni off-guard. Some forecasters, Yardeni included, anticipated a new Roaring ’20s for this century… only to be interrupted by the pandemic. But is it too late for this prediction to become a reality? According to Yardeni, not at all.
Ed Yardeni is president of Yardeni Research, and he previously served as chief investment strategist at a number of investment companies, including Deutche Bank. He has additionally held positions at the Federal Reserve Bank of New York, Federal Reserve Board of Governors, and US Treasury Department. For more economic insights and investment guidance, visit yardeni.com.
In This Episode
* The ’90s Internet boom (1:25)
* The Digital Revolution (5:01)
* The new Roaring ’20s (9:00)
* A cautious Federal Reserve (14:24)
* Speedbumps to progress (18:18)
Below is a lightly edited transcript of our conversation
The ’90s Internet boom (1:25)
Pethokoukis: Statistically speaking, the PC Internet boom that you first started writing about back in the early ’90s ended in 2004, 2005. How surprising was that to economists, investors, policy makers? I, to this day, have a report, a 2000 report, from Lehman Brothers that predicted, as far as the eye could see, we would have rapid growth, rapid productivity growth for at least another decade. Now, of course, Lehman didn't make it another decade. Was that a surprise to people that we didn't have an endless productivity boom coming out of the ’90s?
Yardeni: I think it definitely was a surprise. I mean, it was surprising both ways. Not too many people expected to see a productivity boom in the second half of the 1990s, which is what we had. I did, as an economist on Wall Street. More importantly, Alan Greenspan was a big promoter of the idea that the technology revolution would in fact lead to better productivity growth and that that might mean better economic growth and lower inflation. And it didn't look that way for a while; then suddenly the Bureau of Economic Analysis went back and revised the data for the late 1990s and, lo and behold, it turned out that there was a productivity boom. And then it all kind of fizzled out, and it raises the question, why did that happen? Why was it such a short lived productivity boom? And the answer is—well, let me give you a personal anecdote.
I worked at Deutsche Bank in New York in the late 1990s, and I had to be very careful walking down the corridors of Deutsche Bank in midtown Manhattan not to trip over Dell boxes. Everybody was getting a Dell box, everybody was getting the Dell boxes loaded up with the Windows Office. And when you think back on what that was able to do in terms of productivity, if you had a lot of secretaries on Selectric typewriters, Word could obviously increase productivity. If you had a lot of bookkeepers doing spreadsheets, Excel could obviously increase productivity. But other than that, there wasn't really that much productivity to be had from the technology at the time. So again, where did that productivity boom come from? It couldn't have been just secretaries and bookkeepers. Now the answer is that the boxes themselves were measured as output, and so output per man hour increased dramatically. It doesn't take that many workers to produce Dell boxes and Windows Office and Windows software. So as a result of that, we had this big boom in the technology output that created its own productivity boom, but it didn't really have the widespread application to all sorts of business model the way today's evolution of the technology boom is, in fact, capable of doing.
What you've just described, I think, is the explanation by, for instance, Robert Gordon, Northwestern University, that we saw a revolution, but it was a narrow revolution.
I
As I often remind subscribers to Faster, Please!, predictions are hard, especially about the future. The economic boom of the 1990s came as a surprise to most economists. Equally surprising was that it ended so soon. Neither of these events caught Ed Yardeni off-guard. Some forecasters, Yardeni included, anticipated a new Roaring ’20s for this century… only to be interrupted by the pandemic. But is it too late for this prediction to become a reality? According to Yardeni, not at all.
Ed Yardeni is president of Yardeni Research, and he previously served as chief investment strategist at a number of investment companies, including Deutche Bank. He has additionally held positions at the Federal Reserve Bank of New York, Federal Reserve Board of Governors, and US Treasury Department. For more economic insights and investment guidance, visit yardeni.com.
In This Episode
* The ’90s Internet boom (1:25)
* The Digital Revolution (5:01)
* The new Roaring ’20s (9:00)
* A cautious Federal Reserve (14:24)
* Speedbumps to progress (18:18)
Below is a lightly edited transcript of our conversation
The ’90s Internet boom (1:25)
Pethokoukis: Statistically speaking, the PC Internet boom that you first started writing about back in the early ’90s ended in 2004, 2005. How surprising was that to economists, investors, policy makers? I, to this day, have a report, a 2000 report, from Lehman Brothers that predicted, as far as the eye could see, we would have rapid growth, rapid productivity growth for at least another decade. Now, of course, Lehman didn't make it another decade. Was that a surprise to people that we didn't have an endless productivity boom coming out of the ’90s?
Yardeni: I think it definitely was a surprise. I mean, it was surprising both ways. Not too many people expected to see a productivity boom in the second half of the 1990s, which is what we had. I did, as an economist on Wall Street. More importantly, Alan Greenspan was a big promoter of the idea that the technology revolution would in fact lead to better productivity growth and that that might mean better economic growth and lower inflation. And it didn't look that way for a while; then suddenly the Bureau of Economic Analysis went back and revised the data for the late 1990s and, lo and behold, it turned out that there was a productivity boom. And then it all kind of fizzled out, and it raises the question, why did that happen? Why was it such a short lived productivity boom? And the answer is—well, let me give you a personal anecdote.
I worked at Deutsche Bank in New York in the late 1990s, and I had to be very careful walking down the corridors of Deutsche Bank in midtown Manhattan not to trip over Dell boxes. Everybody was getting a Dell box, everybody was getting the Dell boxes loaded up with the Windows Office. And when you think back on what that was able to do in terms of productivity, if you had a lot of secretaries on Selectric typewriters, Word could obviously increase productivity. If you had a lot of bookkeepers doing spreadsheets, Excel could obviously increase productivity. But other than that, there wasn't really that much productivity to be had from the technology at the time. So again, where did that productivity boom come from? It couldn't have been just secretaries and bookkeepers. Now the answer is that the boxes themselves were measured as output, and so output per man hour increased dramatically. It doesn't take that many workers to produce Dell boxes and Windows Office and Windows software. So as a result of that, we had this big boom in the technology output that created its own productivity boom, but it didn't really have the widespread application to all sorts of business model the way today's evolution of the technology boom is, in fact, capable of doing.
What you've just described, I think, is the explanation by, for instance, Robert Gordon, Northwestern University, that we saw a revolution, but it was a narrow revolution.
I
24 min