Even as a participant in the derivatives market, I found new derivatives wrinkles pretty boring, however lucrative they might be. Equally in software, the latest “social media” app, however irresistible to billions of dozy consumers, leaves me cold. Fortunately, help is at hand. With international tensions ever-increasing, research money is pouring again into the military-industrial complex. Soon we shall thrill at the release of the 2020s equivalent of those 1950s giants: the B52 bomber, the U-2 spy plane, the USS Nautilus nuclear submarine, the Lockheed Starfighter and the AR-15 rifle. If technology is to thrill us, it needs to go VROOM!
Peter Thiel said it most memorably, when in 2011 he expressed the disappointment at recent tech innovations, saying: “We wanted flying cars; instead we got 140 characters.” Since then, tech has in a way become twice as innovative — Twitter’s limit has been expanded to 280 characters! However, at least until very recently, the truly astronomical and indeed excessive amounts of venture capital and private equity money devoted to tech innovation have brought few innovations of any importance, and very few indeed that you could drop on your foot.
This may now be changing. The recent breakthroughs in Artificial Intelligence promise to bring us advances with importance far beyond the world of software and the ubiquitous but damaging and useless social media. Money will now flow into this sector, but as this column has discussed, the most important advances are likely to come from small innovative operations, not from the corporate behemoths who are rushing to buy up everything they can find in the area.
Instead of further immaterial advances in software (though those advances will be necessary to make everything work) it now looks likely that the next wave of technical progress will come in the most drop-it-on-the-foot of all technological areas: military equipment. The Financial Times this week published a lengthy account of China’s military build-up, with greater private sector involvement in military procurement and an overall move from the inefficiencies of pure state-controlled technological advance to something much closer to the U.S. public-private partnership, which China believes produces faster progress. Meanwhile, Silicon Valley private equity funds are pouring far more money into defense sector startups, with $33 billion invested in 2022 and $14.5 billion in the first quarter of 2023.
This reorientation of innovation towards defense industries may or may not be good for economic growth, but it is certainly good for the quality of the innovations themselves. To see what the innovations of 2030 might look like, we should examine the 1950s, the last time a defense build-up spurred innovation, when in 1958 defense expenditure soared to 8.8% of GDP, a peacetime record and nearly three times the current level.
Instead of meaningless social media apps, the principal innovations of the 1950s were long-range bombers, spy planes and missiles. The bomber advances were led by the great Air Force General Curtis LeMay the hero of the air war against Japan (later reviled by the left-wing media when he ran as Vice-Presidential candidate with Alabama Governor George Wallace in 1968). LeMay was a true believer, wishing in 1956 to develop a nuclear-powered long-range bomber that could fly at Mach 4 – thus delivering the sonic boom and the radiation blast simultaneously to millions of civilians underneath its flight path. No doubt Madison Avenue’s wizards, the other intellectual cutting edge of the 1950s, could have invented a new jingle about the benefits of glowing in the dark.
The principal innovation early in the decade, the B-52 bomber, was truly a technological wonder. At the time of a Fortune magazine article in July 1951, Boeing plants in Wichita and Seattle were producing the first jet bomber, the B-47 in large numbers and had completed two prototypes of the B-52, which on the basis of the B-47’s performance the Air Force had bought sight unseen. Moreover, the new bomber would be unprecedentedly automated:
“Substituting for eight sets of human brains is an electronic setup involving 6,000 different wires, which, set end to end, would extend 18.7 miles (and this is excluding the twenty miles of wires in the 3,000 pound, 1,500 tube bomb system).”
(The “tubes” referred to are vacuum tubes, the hot, delicate predecessor of the transistor – keeping 1,500 of them in operation simultaneously must have been a Herculean task.) However, the B-52s, possibly with their vacuum tubes replaced by integrated circuits, are still in service with the U.S. Air Force, 68 years after they first came into service in 1955. Truly, they don’t build them like that anymore.
Ten years later, Fortune of June 1961 in “SST— Next Step to Instant Travel” looked at the potential for a Supersonic Transport airliner (SST) the first of which was expected to fly by 1970. It assessed the market for such a plane confidently; after all, airline passengers had shown a persistent desire for speed, transferring their allegiance to jet aircraft as soon as they had become available (1951 in Britain – the Comet I; 1958 in the United States – the Boeing 707) so they could be expected to migrate immediately to aircraft that could fly them from New York to Paris in 2½ hours. According to Fortune
“A missile-like profile should enable the supersonic transport to cleave through the stratosphere at 2,000 miles per hour, yet maneuver safely around airports.”
The magazine darkly warned that there was a danger of the Russians getting there first, as they had into space with Sputnik in 1957, while perfidious Albion had teamed up with France to work on their own design.
Alas, the optimism of 1961 proved chimerical. The SST, violently opposed by environmentalists (a species that barely existed in the blessed days of 1961) was cancelled by the Nixon administration at the end of 1970. By that time, the Soviets had indeed come first, having no environmentalists – the Tupolev TU-144 had made its maiden flight in December 1968, two months before the Anglo-French Concorde. However, the TU-144 crashed at the 1973 Paris Air Show, and TU-144 service was introduced in 1977 only between Moscow and Almaty. Concorde flew for 30 years (albeit at only a measly 1,500 miles per hour) until its own Paris crash in 2000 resulted in its being withdrawn from service. Thus, the magnificent progress of the 1950s ground to a dead halt, bedeviled by environmentalists, regulatory explosion, fuel prices and the inability of Concorde to carry passengers at a reasonable cost.
Finally, you should remember that these magnificent machines were designed and made without many of the engineering tools we now take for granted. Another Fortune article “How to Speed Up Invention” of November 1956 pointed out that an engineer of 1906 would find himself quite at home in a 1956 design shop – he would still be expected to use the tools of pencil and paper drawings that he had used fifty years previously. The article pointed towards a roseate future in which we would have access to a “design machine” by which his pencil and paper sketches could be reproduced in a computer, that would send instruction to numerically-controlled machine tools to produce a prototype.
Here progress has been truly miraculous; by 1981 we had the “design machine” for example that manufactured by Computervision Inc. Utterly impressed by Computervision when I visited its headquarters, I bought shares – to lose three quarters of my investment, as its “design machines” became commoditized and the company was eventually taken over in 1998. Now we have the next massive advance: 3-D printing, in which a general-purpose derivative of 1956’s Haloid Corporation (later Xerox) prototype copying machine can manufacture whatever we want, instructed by software.
If you had told a 1956 design shop of the design wonders to come, they would have assumed that technological progress would have been infinitely speeded by such devices, so that now we would have not only an SST but almost certainly interstellar space travel, so much more efficient would innovation have become. The burning question must be: why has this not happened? Peter Thiel’s question of 2011 is not only pertinent but from the vantage point of 1956 would have looked hopelessly unambitious. What went wrong?
Two things. One is the witlessness of consumers, who have not kept up with the advances available; most of them would rather have social media than rockets to the stars. That is not fixable, at least in the short term, but the other error of our time could be: the insane proliferation of regulations, environmental constraints and diversity consultants that have sprung up since the early 1960s, most of them without any reasonable cost/benefit calculation. In one simple example: this week the collapsed roadway of I-95 in Philadelphia was repaired in 7-10 days, compared with the estimates of up to a year that were based on other recent road projects. That would have been no miracle in 1956; it is a miracle today because it was achieved by cutting through bureaucracy — Pennsylvania Governor Josh Shapiro and Transportation Secretary Pete Buttigieg decided it was essential, so the bureaucracy, the greenies and the diversity consultants were quelled.
We have a choice: we can have progress in civil as well as military wonders, as in the halcyon 1950s, or we can have environmentalists, regulatory bureaucrats and diversity consultants. The future of humanity depends on which we choose.
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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)