There is a small but real chance our lives will be considerably disrupted January 1, 2000.
The purpose of this comment is not to alarm you or to join the ranks of perennial gloom-sayers. It was great sport making fun of them in the late 1970’s and early 1980’s. These were the folks who insisted inflation could not be reined back in without a total collapse of the economy, that a well diversified investment strategy consisted of a home in the woods with a gun, some gold coins, and a year’s supply of trail mix. Not to say things couldn’t have spiraled out of control back then … just that these folks seemed so sure that the “morons” in responsible positions did not grasp the problem and would almost surely not do sensible things to solve it. That’s where my naïve optimism paid off: I didn’t think the Volckers of the world (Paul Volcker: then head of the Federal Reserve) were remotely morons. I thought that when push came to shove, they would shove back as needed. It is this same naïve optimism that leads me to hope that Japanese leaders will act in the nick of time (they need, for starters, to cut way back on their tax rates, nationalize some of their banks, and “open the books” to more transparent accounting), thus to avert an even much worse Asian crisis that could easily become a world crisis.
One cannot be sure of such things, which is why one hedges one’s bets. (Note that Warren Buffett, no market timer, has nonetheless bought billions of dollars in zero-coupon, long-term U.S. Treasury bonds and millions of ounces of silver. I am not recommending either of those for mere mortals like us — for one thing, the price of those zeroes has gone way up since he bought them. But I do know that money you might need in the next five years belongs in the bank, not the stock market.)
But the Year 2000 problem is different. The Y2K problem can’t be solved by getting the powers-that-be to adopt sensible policies. Yes, part of the problem could be one of leadership and psychology — if people panic, panic alone will cause a financial calamity that could otherwise be avoided. So we need to count on our leaders to avert that — and I think they will. But part of the problem is simple nuts and bolts. For one thing, January 1, 2000 arrives in 501 days and cannot be put off. Can you think of another such crisis? Not counting the precise arrival time of an incoming comet? Any Y2K problems prior to that date will be primarily psychological in nature (The comet is coming! The comet is coming!), and thus avoidable. But any problems from that date on — well, they would be real.
Which is why companies and governments are spending billions and billions and billions of dollars to fix the problem … which is why, in turn, most of us assume it will be a minor annoyance at most … which is why we could be caught unprepared … which is why I’m writing this column now rather than, say, next summer.
The Y2K problem will probably be a minor annoyance to most of us, but it could quite possibly be a huge mess.
The biggest worry is what we’d do if the power went out. Which means, I think, that gasoline would soon go out, too, since gas stations run on electric power. No light, no heat, no refrigerator, no elevator, no computer … if it lasted just a few hours, as after a bad storm, it would be no big deal. But longer?
Probably this won’t happen, but it’s pretty hard to be absolutely certain. A friend of mine who I can say without a trace of modesty is much smarter than I am, long ago founded an institute to consider such nuts-and-bolts planetary problems. He is concerned about embedded processors. These little items are buried in things like the railway system. They took the place of the guy who would go out and manually switch tracks at the appropriate time, so trains careening through a junction headed in the right direction. So what if 2% or 5% of these embedded processors have a Year 2000 problem and, because they think it’s 1900, fail to switch properly? How long would it take to locate them all (they’re embedded! buried!) and replace the ones that need fixing? And in the meantime, he asks, how would things like food replenish your supermarket shelves?
Somewhere else I read about the problem — I hope it’s a myth — of an ancient piece of software that tells old computer fans when to go on and off. It naturally wouldn’t affect your Compaq. But what of some of the old mainframes? Everything else is working perfectly, according to this disaster tale, except this virtually prehistoric little bit of code controlling the fan. The fan does not go on (the code thinks it should wait 100 years before 20 minutes will have passed since the last time it went on), the computer overheats and goes down, and whatever it is controlling — the air traffic control system, your Social Security check — goes down with it.
I do not remotely have the competence to assess the reality of these kinds of threats. I know they’re real, or companies wouldn’t be spending hundreds of billions of dollars to try to deal with them. I know they’re real, also, because people like my friend the institute-founder do have the competence to assess these things and do not believe 100% of the Y2K problems around the world can be solved by midnight on December 31, 1999. And I know they’re real because the world is sufficiently interconnected that a problem in Japan or Italy can easily cause a problem in your home town. A score of 95% is an A in high school but would leave 5% of the Y2K software glitches undetected. Depending on what they were, these glitches could cause tremendous problems.
So the comet is coming, and now, when nobody’s panicking, is the time to do our emergency-preparedness stuff. Because the paradox is that if we do all prepare for food shortages and panic-in-the-streets, there won’t be food shortages or panic in the streets. But if we don’t, there just might.
Tomorrow: A Shopping List
Quote of the Day
We're not trying to outsmart the smart guys. We're trying to sell bonds to the dumb guys.~alleged remark of the head of a Wall Street mortgage-bond group
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