Chapter 1. How We Got Here - Post B
Then came the Industrial Revolution, driven by cheap steel and a flood of new inventions. Wealth grew in steel, industrial machinery, and transportation. The infrastructure change to railroads, shipping, and the telegraph. Important economic indicators shifted to coal, iron and steel production, patent applications, and railroad operating income.
Great family fortunes were built in these new areas – well-known names like Morgan, Bessemer, Vanderbilt, Astor, Carnegie, Rockefeller. Although investors could still make money buying and selling in the agrarian economy, it was much easier to get the wind at their backs investing in the new areas side-by-side with the entrepreneurs.
After World War I, the United States and most of the developed world shifted to mass production and consumer-based economies, thanks in some measure to Henry Ford. The economic driver changed to cheap energy – especially oil. The middle class grew faster with enough income and an enabling technology (the automobile) to move out of the noisy polluted cities. People did not have to live within walking distance of the factory anymore.
At that point, the growth industries changed to autos, housing, and retailing. The infrastructure shifted to highways, airports, telephones, and broadcasting. The important economic indicators changed to retail sales, auto sales, housing starts, and capacity utilization.
Again, new family fortunes were built in these areas. Automobile families were the royalty of the Midwest. Home-building created many multimillionaires after World War II. The Waltons (Walmart) success story may be the last example that era. Again, investors made the highest returns by focusing on the rapid growth opportunities in the new economy.
Then came the technology economy. As with all generalizations it's easy to argue about when the digital age began. IBM introduced the first commercial mainframe computer, the 704, in 1954. Digital Equipment, the leading minicomputer company, was founded in 1957 and introduced the PDP-8 in 1965. But it was the demands of the Department of Defense plus NASA that drove the process of miniaturization to the point where Fairchild and Texas Instruments invented semiconductors and Intel, descendant of Fairchild, gave birth to the Intel 4004 microprocessor on November 15, 1971.
Microprocessors powered the digital watches and handheld calculators of the mid-1970s. Apple introduced the Apple I, their first commercial PC for hobbyists, in 1976. A year later they introduced the Apple II. By the late 1970s, personal computers were spreading by the hundreds of thousands. Apple computers could even be seen on the desks of non-wonks in ordinary companies.
But this was not yet the Age of Empowerment, when anyone could buy a personal computer for less than $2,000 and make it do useful things. It took IBM, the dominant mainframe manufacturer, to put the Good Housekeeping seal of approval on personal computers by coming out with its own in 1981, clearly marking the latest change in the economy.
The economic driver changed to ever-cheaper semiconductors that underlie all the advances in computing and communications. There were almost unbelievable price drops in semiconductor chips. The late Gordon Moore, a cofounder of both Fairchild Semiconductor and Intel, propounded Moore's Law in 1965:
The cost of making a semiconductor drops 50% every two years.
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