http://www.nytimes.com/2000/10/22/opinion/22KRUG.html The New York Times October 22, 2000 RECKONINGS Unsound Bytes? By PAUL KRUGMAN Last week George W. Bush accused Al Gore of "analog thinking in a digital age." It's a terrific line; my compliments to whoever wrote it. It's also a bit unfair. True, Mr. Gore didn't invent the Internet � but then, he never said he had. What he did say was, "During my service in the United States Congress, I took the initiative in creating the Internet." That was a deeply unfortunate sentence � but what makes it so unfortunate is that now it is impossible for Mr. Gore to get the credit he actually deserves. Declan McCullagh, the Wired writer who first played up Mr. Gore's remark, puts it this way: the vice president "was one of the first politicians to realize that those bearded, bespectacled researchers were busy crafting something that could, just maybe, become pretty important." For what it's worth, tech-sector C.E.O.'s seem to be divided about evenly between Messrs. Gore and Bush. That is a sharp contrast with C.E.O.'s at large, who overwhelmingly favor Mr. Bush � a preference cynics might attribute to the large personal gains that people with seven- or eight-figure incomes would receive from that tax cut. Still, Mr. Bush is right: Mr. Gore doesn't know how to manage the new economy. But then neither does Mr. Bush. And neither does anyone else. The big difference between the new economy and the old is the changed nature of investment. In the past, businesses primarily invested in the tangible means of production, things like buildings and machines. The value of a company was at least somewhat related to the value of its physical capital; to grow bigger, a business had to build new factories roughly in proportion to the increase in its sales. But now businesses increasingly invest in intangibles. And once you've designed a chip, or written the code for a new operating system, no further investment is needed to ship the product to yet another customer. One consequence of the changed nature of investment is a strong tendency for markets to develop into temporary monopolies. Why monopolies? Because when the required size of investment doesn't depend on how much you sell, a bigger market share is definitely better. Why temporary? Because sooner or later, and usually sooner, new technology makes your old investment worthless. [...] ------------------------------------------------------------------------- POLITECH -- the moderated mailing list of politics and technology You may redistribute this message freely if it remains intact. To subscribe, visit http://www.politechbot.com/info/subscribe.html This message is archived at http://www.politechbot.com/ -------------------------------------------------------------------------
