April 7, 2009

Why the Tech Bubble wasn't as bad for us as the Housing Bubble

Vernon L. Smith, the Chapman U. Nobel Laureate behavioral economist, argues in the Wall Street Journal what I've been saying for awhile: the Dot.Com bubble wasn't as disastrous for us because day traders blowing a wad on Pets.com didn't have as many ramifications as drywallers defaulting on California mortgages:

Earlier, during the downturn in the equities market between December 1999 and September 2002, approximately $10 trillion of equity was erased. But a measure of financial system performance, the Keefe, Bruyette, & Woods BKX index of financial firms, fell less than 6% during that period. In the current downturn, the value of residential real estate has fallen by approximately $3 trillion, but the BKX index has now fallen 75% from its peak of January 2007. The financial sector has been devastated in this crisis, whereas it was almost completely unaffected by the downturn in the equities market early in this decade.

How can one crash that wipes out $10 trillion in assets cause no damage to the financial system and another that causes $3 trillion in losses devastate the financial system?

In the equities-market downturn early in this decade, declining assets were held by institutional and individual investors that either owned the assets outright, or held only a small fraction on margin, so losses were absorbed by their owners. In the current crisis, declining housing assets were often, in effect, purchased between 90% and 100% on margin. In some of the cities hit hardest, borrowers who purchased in the low-price tier at the peak of the bubble have seen their home value decline 50% or more. Over the past 18 months as housing prices have fallen, millions of homes became worth less than the loans on them, huge losses have been transmitted to lending institutions, investment banks, investors in mortgage-backed securities, sellers of credit default swaps, and the insurer of last resort, the U.S. Treasury. ...

Why does one crash cause minimal damage to the financial system, so that the economy can pick itself up quickly, while another crash leaves a devastated financial sector in the wreckage? The hypothesis we propose is that a financial crisis that originates in consumer debt, especially consumer debt concentrated at the low end of the wealth and income distribution, can be transmitted quickly and forcefully into the financial system.

For example, the biggest decline home prices in Los Angeles County is seen in the lowest priced zip code: the fabulous 93591, the Lake Los Angeles part of eastern Palmdale in the high desert. In February, 21 homes sold there. The median price was $55,000, down 78% from February 2008. In contrast, in the worst zip code in Compton in the 'hood, 25 homes sold, with a median price of $140,000, down 52%.

By the way, I drove through both Palmdale and Compton last week, and I have to say ... they look marvelous. Practically every residential street in SoCal looks great in early Spring. (The commercial streets not so much). Slums in SoCal just don't look like slums on The Wire. I wonder if Countrywide and Fannie Mae arranged to take Chinese bankers interested in buying their cruddy mortgage-backed securities and stock through Palmdale and Compton in late March?

My published articles are archived at iSteve.com -- Steve Sailer

38 comments:

rightsaidfred said...

consumer debt concentrated at the low end of the wealth and income distribution, can be transmitted quickly and forcefully into the financial system.

This is probably why the local pawn shops make a modest living writing fully collateralized loans at 300%. As Buffet said, it's not that the risk is too high, it's that the premium is too low.

Anonymous said...

This real estate market crash affects more people deeper than the dotcom market crash for many reasons. Most folks did not have most or nearly all of their wealth and assets in their stock portfolio back then. However, most folks do have more than half of their assets and wealth in their real estate portfolio. For most people a house, or two if they are lucky, is what they have to show for after a lifetime of hard work. It's not the same with stocks. Most people in 00' or even now, do not have all of their assets in stocks. Plus, alot of folks took out equity on their homes during the boom years. For many, this was on top of their existing mortgages. Now, their property values have declined so much they have lost a large portion of their asset values. Plus, unlike right after the dotcom market crash, they simply do not have access to low interest loans from their credit card companies or banks to replenish their loses. You need money to make money or make money back. More People simply have less money as a result of the real estate market declines. Even for people who did not take out a new mortgage are feeling it. Like most folks, I took out a loan from my credit card company at 3.99% fixed, and last month they increased it to 19%. I made my payments on time and I do not have large mortgages. Plus it's much harder for businesses to get new loans as well. There is a shortage of money to lend... Until they fixed this I don't see how we can come out of the recession that we are in.....

AC said...

Well it's pretty simple; when the tech bubble collapsed house prices were still rising. This blunted the decrease in wealth caused by stock collapse, and helped prop up consumption and all that good stuff. This time both the housing market and the stock market dropped together, creating a much larger drain on wealth with much more harmful effects.

Jim Bowery said...

Ah, but if you recall the noise of the tech bubble popping, it included sounds of the Segway.

The noise of the housing bubble popping is quite different:

General Motors Corp. is teaming with Segway Inc., maker of the upright, self-balancing scooters, to build a new type of two-wheeled vehicle designed to move easily through congested urban streets.

The machine, which GM says it aims to develop by 2012, would run on batteries and use wireless technology to avoid traffic backups and navigate cities.

The Project P.U.M.A. (Personal Urban Mobility and Accessibility) prototype is shown in Brooklyn April 4. GM and Segway say the vehicle could allow people to travel around cities more quickly, safely, quietly and cleanly, and at a lower total cost.

The struggling auto maker, surviving on a government lifeline, is looking to generate enthusiasm for its increasingly uncertain future ahead of the New York auto show this week.

GM has slashed product-development programs, advertising and spending on auto-show events. But it will take to the streets of Manhattan on Tuesday to show off a prototype of the vehicle, called PUMA, for Personal Urban Mobility and Accessibility.

The Segway Personal Transporter was launched with considerable hype eight years ago but practical issues prevented the scooter from becoming a mass-market product, including its relatively high cost and restrictions on its use in many jurisdictions.


Gotta wear shades...

Anonymous said...

OT: How about a blog posting on Obama bowing at the waist to the Saudi King, Steve? That was the first time ever that a POTUS bowed to any foreign leader. Besides the obvious Muslim fealty, it was a total departure of protocol for a head of state to do such a thing. Heads of State do not bow to royalty, at least not to foreign royalty. It was off the scale wacky.

The Obama Bow points to unprecedented madness on many levels...and Drudge ignored it also even though there are pics and video.

stari_momak said...

That's good financial reasoning. Possibly the 'wealth effect' on spending habits is greater when people think that wealth is in a supposedly solid asset like real estate. Possibly average folk were able to leverage more borrowing against their real estate than against stock portfolios.

For the real economy, however, I think there were other, perhaps more dire consequences, of the housing boom/bust that made it far worse than the tech bubble.

1) the overproduction of not only useless, but positively bad good. The tens of thousands of beige tracts in areas like riverside county. Not only was decent farm/pasture/open land destroyed to build these, but the houses themselves are now a cost . They most be patrolled to keep them from becoming squats, dens of prostitution, etc. Pools must be drained, all sort of bad externalities. In contrast, Netscape or Red Hat Linux or whatever leaves little behind when it goes under.

2) the massive labor force imported to build those bad. The housing construction workforce is dominated by Mexican immigrants in Southern California, and I am sure that they are a big part of the same workforce in other 'sand states'. They won't be leaving. Of course, we got H1-Bs during the tech boom, but not nearly so massive and impact, and I'd guess a greater proportion of these go home.

3) At least the tech boom led to a race to innovate etc. It is obvious in hindsite that too many people in too many companies were chasing too few dollars, but that race did produce a lot of innovation very quickly. I don't think big developers were really pushing themselves to make major improvements in housing during the real estate boom.

Frank said...

The dot.com bubble produced the human capital, hardware-software engineers, foundries, advances in physics and chemistries that will enable growth in real wealth in the upcoming decades. The housing bubble produced granite counter top McMansions inhabited with semi-literates (FICO < 600) unable to do simple arithmetic. It's the marching morons scenario:

http://en.wikipedia.org/wiki/The_Marching_Morons

Thrasymachus said...

The dot com bubble was financed by equity, and I think a lot of people bought these stocks with money they could afford to lose. Once it was gone it only affected the owner.

The housing bubble was all debt, and because it was "so safe", implicitly and now explicitly guaranteed by the US, it was held as widows' and orphans' money. Going bad hurts the owners, the mortgage companies and bans that generated the debt, the brokerages which for some reason held onto a lot of it, the government institutions (read- taxpayer) guaranteeing it, and the collapse itself disemploys numerous mortage guys, realtors, small contractors, construction workers, etc.

The seductive beauty of SoCal has led to the ruin of the place. In one generation it has all been sold to foreigners.

Anonymous said...

Steve - how about some local coverage - do a thread discussing the NAM kidnappers that are driving around the West Side kidnapping young women.

This story hasn't gotten a lot of coverage in the MSM

_

A woman fought off three would-be abductors who tried to pull her into a white van Monday on a Hermosa Beach street, police said.

The attempted kidnapping was eerily similar

Sketch of suspect from other incident to a crime reported in Redondo Beach in January, and police said it might be related.
In this crime, the woman could see ropes inside the van, Hermosa Beach police Sgt. Robert Higgins said.

The woman told police that a dirty white van pulled up to her as she walked in the 600 block of Fourth Street about 2 p.m.

Two men were seated in the cab and another in the back.

One of the men asked for directions.

When the victim walked closer to offer them directions, the van's side door swung open.

One man tried to pull her inside.

"The victim fought back and was able to escape from the suspect's grasp," Higgins said. "The victim fled the area and called police."

The van drove


--------------------------------------------------------------------------------

Advertisement

--------------------------------------------------------------------------------
away. Police searched the area, but could not locate the vehicle.
The men were described as Latinos in dark clothing. Their van had small back windows.

Last month, Redondo Beach police released a sketch of a man who tried to kidnap a woman in January after asking for directions.

He was driving a white van.

Detectives said the man asked for directions. When the woman moved close to the van, the sliding door opened and a man got out and grabbed her.

She hit the attacker with her purse and escaped.

larry.altman@dailybreeze.com

Anonymous said...

"How can one crash that wipes out $10 trillion in assets cause no damage to the financial system and another that causes $3 trillion in losses devastate the financial system?"

Seriously? In the dot-com crash, Wall Street was selling Main Street worthless crap (shares in money-losing tech companies), and in the mortgage crash, Main Street was selling Wall Street worthless crap (liar loans, etc.). Wall Street packaged these crap loans into crap securities that it sold to institutional investors, but, unlike during the dot-com boom, Wall Street also held a lot of these crap securities on its books.

- Fred

Anonymous said...

...and before noon.

James B. Shearer said...

... Slums in SoCal just don't look like slums on The Wire ...

Does this comment mean you have finally got around to watching The Wire? How about a review?

PRCalDude said...

A woman fought off three would-be abductors who tried to pull her into a white van Monday on a Hermosa Beach street, police said.

What's he supposed to cover? I just drove through that area and (guess what?), there are white vans full of Latino construction workers everywhere. Pretty tough to narrow down the right one, unless (gasp!), the white libs of the South Bay decide they want to stop using Mexicans for their remodels and additions.

Que lastima!

testing99 said...

Steve, you're not getting it.

The Tech Bubble depended on wildly over-estimated stocks betting on technological change, ala the Railroad, Telegraph, Telephone, and electricity booms of the 19th Century.

The wildly over-valued assets, the stocks, themselves went no further (than being bought and sold).

BY CONTRAST -- the Housing Bubble ended up having crummy mortgages chopped up and sold as various garbage securities, and then traded globally, and then insured (THAT'S where the big risk was) and this was done GLOBALLY.

Not just with strawberry pickers in Fresno and Drywallers in Palmdale, but Greek vacation home builders, Spanish and French real-estate speculators "flipping that house" and English, Irish, and Icelandic middle class people buying houses they could not afford.

The problem was GLOBAL, and made worse by writing insurance against the loans based on a wildly inflated price for global housing prices.

That's WHY the former, the Dot-com crash, affected the financial market only mildly. There were not huge insurance contracts to be paid out. And why the latter, the GLOBAL housing bubble, caused a GLOBAL collapse.

Steve you'd like to blame this on Clinton-Bush policies pushing home ownership to unqualified non-Whites, but the truth is the problem was GLOBAL and caused a GLOBAL melt-down.

Bad as the "Sand State" housing melt-down was, it was a drop in the bucket compared to Europe, Canada, and elsewhere. All of whom crashed at the same time due to stress by rising gas prices shooting up exponentially due to both rising India/China demand and restrictions in supply from the Gulf.

Lessons:

1. Equities booms don't do lasting damage as long as they are confined to equities.

2. Mortgage or other instruments that can chopped up and sold as "strips" or other junk bond-type assets that have insurance written on them can be VERY deadly if ...

3. The financial system is GLOBAL and therefore creates GLOBAL risk.

Nick Sarkozy said...

A woman fought off three would-be abductors who tried to pull her into a white van Monday on a Hermosa Beach street, police said.

Relax. Abducting women off the street with a dirty van is just a normal courtship ritual in most of the hellholes of the world.

Can't wait to the read the true crime stories coming out of LA in say 2011 or 2012. Official hellhole status will be designated by 2015. And probably for a lot larger area than LA County but hopefully not the entire state.

Remember: this outcome is what your elites desire. This is a controlled demolition of the U.S. economy, sovereignty, language, culture and borders. This is a big bankster takedown. Greenspan knew exactly what he was doing when he inflated the final fatal bubble with his 1% interest rates.

The great flaw in American culture is the population's capacity for buying the "We didn't realize" excuse from politicians. These aren't ignorant mistakes. This stuff is all premeditated. They envision America as an obedient component of a global government.

Next up is another false flag terror attack in order to trigger war with Iran. They will need your kids to fight in Iraq, Iran, Afghanistan and Pakistan for the foreseeable future. They will be seeking to draw in Russia and China. This is in the Orwellian "War Against East Asia" mold.

All the while the elites will encourage much more Muslim immigration to the West which justifies ratcheting up domestic security measures against the growing terrorist threat that the Muslims themselves create.

Daylight kidnappings off the street are a sign that the plan is progressing nicely in America. Hey, you gotta crack some eggs to make an omelette.

steve wood said...

... Slums in SoCal just don't look like slums on The Wire ..

You mean because they're mostly low-rise with lots of single-family houses?

The same thing is true in Miami. Even more true, in fact, because of the lush greenery that pops up everywhere with no need for cultivation. Drive the elevated expressways of Miami, even through the slums, and the residential streets look like modest but pretty suburbs, all green and bedecked with flowering plants and swaying palm trees (proper, tropical-paradise-type coconut palms, too, not those weird scrawny ones you have California). Even on the streets themselves, where you can see the graffiti and the hoods hanging out on the corners, it's still a lot less menacing than the crowded, high-density slums of the Northeast and Midwest.

Anonymous said...

t99

All of whom crashed at the same time due to stress by rising gas prices shooting up exponentially due to both rising India/China demand and restrictions in supply from the Gulf.

How many times does this have to be debunked before you stop repeating it?

Anonymous said...

It's interesting that no one seems to read the meaning of the Segway and its potential adoption as an acceptable or worse preferred mode of urban transport.

The Segway cannot be used to transport children safely or legally. A city which refuses to have reasonable public transit but which allows or worse encourages Segway usage is announcing a giant fuck you to parents. It's a capitulation or worse celebration of the postWestern ideal of the city as the anti-breeder haven. Party in the city, reproduce in the burbs. O tempora o mores.

Anonymous said...

Heh... We live in Lancaster, just north of Palmdale. Palmdale is rumored to be presenting itself as somewhat more upscale than Lancaster. Palmdale has been getting more of the new shopping venues, as well as more restaurants.

Hopefully, by the end of 2010 all this won't matter to me personally too much, because we are getting the h3ll out of Kalifornia permanently.

Big Bill said...

"A woman fought off three would-be abductors who tried to pull her into a white van Monday on a Hermosa Beach street, police said."

"Relax. Abducting women off the street with a dirty van is just a normal courtship ritual in most of the hellholes of the world."

Yup. The Mexicans call it "rapto".

http://libertadlatina.org/LatAm_Mexico_Rape_Victims_Find_No_Justice.htm

Anonymous said...

"By the way, I drove through both Palmdale and Compton last week, and I have to say ... they look marvelous. Practically every residential street in SoCal looks great in early Spring."

Why is this?

Do you have very pretty flora?

Do people take good care of their yards?

What?

PRCalDude said...

Yup. The Mexicans call it "rapto".

After reading that article, Mexico now strikes me as positively Islamic.

Lucius Vorenus said...

Why the Tech Bubble wasn't as bad for us as the Housing Bubble

A surfeit of IQ 120-140 knowledge industry workers can quickly re-organize themselves to do something different which is productive & lucrative.

But legions of IQ 75-85 aboriginal drywall mudders simply cannot.

testing99: ...BY CONTRAST -- the Housing Bubble ended up having crummy mortgages chopped up and sold as various garbage securities, and then traded globally, and then insured (THAT'S where the big risk was) and this was done GLOBALLY...

What made this crisis "global" was nihilism in the civilized world & fertility rates decimated by the birth control pill.

40 years ago, the civilized peoples of the world quit making babies, and now there are no young up-and-comers to whom the real estate can be sold.

Or at least not sold at the prices which people thought they'd be able to get for their real estate [when it came time to cash in and move on to the retirement community] - an IQ 75-85 drywall mudder will never be able to afford the same kind of mortgage that an IQ 120-140 knowledge worker could have afforded [had that knowledge worker been brought into this world back in the 1970s, which, of course, he was not].

Anonymous said...

What is this segway stupidity? What happened to walking? Americans need to do more, not less walking.

Mr. Anon said...

" Frank said...

The dot.com bubble produced the human capital, hardware-software engineers, foundries, advances in physics and chemistries that will enable growth in real wealth in the upcoming decades."

Huh? What foundries were built by Amazon or Google? What advances in physics and chemistry were made by game developers dreaming up new zombies to shoot, or by programmers writing HTML code to sell dog food over the internet?

I must have missed this Golden Era of science and industry.

Anonymous said...

Ha, the quality of posts are really horrible if I may say so. You dimwits are obsessed with other people's supposed low IQ's.

What's wrong with having low IQ's. Must we be all super bright? cant the loq IQ's be left alone to continue with their lives without other's harping on about it.

Besides, my good deluded friends. if you lot are so clever and know what otherr's do not; how come you are not the ones setting the agenda. How come you are always complaining about liberals, neocons, new york intellectuals etc.
Could the answer be that you are not as clever as you think, and perhaps your own IQ's are not that good too. Could it be that you are part of the same people that you like so much to despise?

Just wondering.

wake up said...

hey testing99: that comment you made a few threads back on concealed carry firearms.....'concealed carry is hated by women because it empowers beta males'........was classic insanity.

yeah that was as entertaining as evil neocon's over medicated 'massive muslim coastal speedboat invasion' claims from yesteryear.

rob said...

Am I the only only one who thinks "settle down, Beavis" when crazy99 gets himself going?

And t99, your inability to distinguish between "before" and "after" is something to work on.

neil craig said...

I hadn't realised the disparity betwen the $3 & $10 trillion bubbles & it was surprising.

Some possible reasons, such is the size of the disparity I think it would need all of them & possibly some others to explain it:

The dotcom money never actually existed - those who invested thousands & "made" millions hadn't seen it, spent it or even handled it whereas with houses somebody at some time had put real bricks on top of each other consuming real wealth to do it.

House prices were rising anyway so that took up the slack - this is slightly self fulfilling because it basicly comes down to there wasn't a recession because there wasn't one.

The house crash isn't the the real cause, it is merely the trigger. The cause is that, because of EPA & other government rules, real production has been going to China & the more the economy got hollowed out the more inevitable the crash - dotcom merely happened earlier in the cycle.

And my favourite:
The bailout. Bankruptcy, of financial institutions or anything else, cauterises the wound, endless transfusions without closing the wound don't work.

Frank said...

Anon: "Huh? What foundries were built by Amazon or Google? What advances in physics and chemistry were made by game developers dreaming up new zombies to shoot, or by programmers writing HTML code to sell dog food over the internet?"

One example: The dimensions of chip circuitry dropped dramatically because of demands for processing power. During the dot.com bubble money freely flowed into tech centers and universities to get over the tech/sci humps to do this. Going from 1 um to 50 nm wasn't trivial. In and around that lower number, quantum effects, i.e. local electron states become significant can throw circuit logical for a loop. Depositing materials at these small dimensions was no small chemical feat either. That's just one area. There are hundreds or thousands more.

Entire volumes could be written about sci/tech accomplishments go unnoticed by the public on which civilization quickly adapt and become very dependent on. The zombie shooting software demands more processing power, in turn that power can be used for MRI imaging.

I have close friends and colleagues that lost jobs after the dot.com bust but many quickly picked up and started their own ventures on things like medical devices, specialty chemicals, analytical chemistry instrumentation.... The American economy depends on these types of pioneer nerds.

Could the sci/tech accomplishments of the dot.com bubble been accomplished without the fluff? Perhaps, but it's hard sell to get seed/venture capital from the public without the fluff.

Epicurean said...

What is this segway stupidity? What happened to walking? Americans need to do more, not less walking.

Walking is too cheap. It's for nuuuurds and other losers.

James B. Shearer said...

Google maps has street level views of Compton if you are interested in what it looks like. The lots are all fenced (typically chainlink about 3 ft high along sidewalk) but otherwise don't look too bad.

Felix said...

Please, IQ is very important but this does not mean we have to try to force it into every discussion. This current economic crisis has nothign to do with declining IQ and everything to do with declining economies. In case you have not noticed, over the last decade or so the best parts of Western economies have been uprooted and transferred to Asia.

The spectacular rise of China is very closely related to the economic decline of the West. You simply cannot get rid of most of your real, productive economy and yet maintain rising, or even constant, standards of living. Westerners have been trying to maintain constant standards of living by using debt to make up for lost economic activity, but that can never work in the long run, and last year it stopped working when the debt came due. It's as simple as that. It doesn't matter what the average IQ of your population is, if your corporate and government elites choose to give away your economy for personal profit even though their own high IQs let them perfectly understand the consequences for the country as a whole.

Epicurean said...

What's wrong with having low IQ's. Must we be all super bright? cant the loq IQ's be left alone to continue with their lives without other's harping on about it.

Nothing's wrong with low IQs. And the low IQs usually are left alone to continue with their lives. The same cannot be said for those with IQ over 120, who have to fight every second to justify their lifestyle and often their very existence.

Nobody really has the right to dictate to others how to run their personal lives. But when the masses of normal people, in their ignorance and arrogance, do just that, it can be hard to keep an even temper. It doesn't mean that I hate them, though.

Besides, my good deluded friends. if you lot are so clever and know what otherr's do not; how come you are not the ones setting the agenda.

Throughout human history, the ones setting the agenda were rarely the smartest of the bunch. They were typically the meanest, nastiest, and the most evil. These SOBs were tolerated mostly because they were the ones who can best protect the tribe from the SOBs running the other tribes.

There were some exceptions: Classical Athens, Han Dynasty China, pre-1945 America.

How come you are always complaining about liberals, neocons, new york intellectuals etc.

It's not because these elites (and perceived elites) are dumb. After all, they know how to look after themselves. Most of them are composed of 100-120 IQers (and the occasional token 120+er).

It may be because of their dishonesty, corruption, hypocrisy, incompetence, short-sightedness, greed, psychopathy, destructiveness, and all that jazz.

Could the answer be that you are not as clever as you think, and perhaps your own IQ's are not that good too. Could it be that you are part of the same people that you like so much to despise?

I can't speak for others. I can only speak for myself.

My IQ has been tested at over 120, which puts me in a different class than the IQ 100-120 elite. I really don't want to be a part of such elite, or be the Great Philosopher-King of the world, or any such ambition. All I ask for is a little justice.

Consider why the suicide rate is so high for those with high IQs, and so low for those with low IQs.

If blacks, Hispanics, Arabs, and the other pet tribes of the left had high suicide rates, the liberals would be screaming bloody genocide!

Anonymous said...

Possibly average folk were able to leverage more borrowing against their real estate than against stock portfolios.

Normal people don't borrow against a liquid asset like stock - they sell it. To tap the value of a home (and still have a place to live) you either sell and move to a cheaper place or you must borrow against its value. Tech stocks weren't being used as collateral nearly as often as homes.

Heads of State do not bow to royalty, at least not to foreign royalty.

If that head of state is American, then there is no other kind but "foreign." A head of state wouldn't bow to his own royalty because he would be bowing to himself. Where a country has a monarch that monarch is the head of state. Gordon Brown, Stephen Harper, etc. are merely the heads of their respective governments.

There were strong Muslim overtones to Obama's bow. As protector of the Muslim holy city of Mecca, supposedly all Muslims are obligated to bow to the Saudi King. Whether Obama was saying, with that bow, that he was a Muslim or whether he was simply trying to ingratiate himself with Muslims, his full, ass-high-in-the-air bow, was a slight all Americans. When Obama stuck out his ass for that bow, he was showing us the kind of person he is. He then spent the rest of that trip apologizing for the "sins" of America - slavery, Hiroshima, Iraq, ad nauseum.

The Segway cannot be used to transport children safely or legally. A city which refuses to have reasonable public transit but which allows or worse encourages Segway usage is announcing a giant fuck you to parents.

Typical day, back when I was in college: go to school, with books & laptop; other books that didn't fit in backpack in the trunk. Eat packed lunch. Change into work uniform and go to work. Go to gym, change into gym clothes and work out. After gym, perhaps a stop at the grocery or some other store.

So: book bag, other books, lunch, work clothes, gym bag, groceries. How the hell was I supposed to fit all that on a Segway, PUMA, transit bus, or any other type of enviro-friendly transportation?

Anonymous said...

How the hell was I supposed to fit all that on a Segway, PUMA, transit bus, or any other type of enviro-friendly transportation?

Do you think young Lincoln rode around in a four-in-hand?

If car makers build it, the public will stuff it. What did we do before Ford Excursions? Kids played in the backyard with sticks, not in a gym across town with bags and bags of stuff.

Lighten your load. Life is not a safari and you don't need to carry all/most of what you own.

Mr. Anon said...

"One example: The dimensions of chip circuitry dropped dramatically because of demands for processing power.....That's just one area. There are hundreds or thousands more."

Okay you made a good case for that one, and there may have been a few others. Still I suspect that this would have been done anyway, even without the desire of vacuous teenage couch-potatoes to vicariously mow-down zombies, or of busy soccer moms to order Alpo online.

If one looks at technological progress, by whatever measure one might like to use (patents awarded each year, technical papers published each year, etc.) even stretching back for hundreds of years, it would be fit pretty well by a single exponential curve with a single e-folding time. There really aren't any revolutions in technology.

none of the above said...

I think Thrasymachus has it right. With the tech bubble, the people speculating knew they were speculating. The VCs knew it was speculation, the folks who bought the stocks in the IPOs knew, the employees getting stock options knew. Because everyone knew it was speculation, most people bet money they could afford to lose. The people at the bottom who were hurt tended to be employees of startups, who'd been paid for their 80 hour weeks in stock options that had a small chance of making them rich. And those people knew they were taking a risk, and the ones who couldn't afford such risks mostly didn't take them.

With the housing market, almost everyone seems to have convinced themselves that it wasn't speculation. Home buyers signing interest-only mortgages with a 5 year baloon payment were convinced that they were *not* speculating, but instead were investing in their future. Even flippers thought they had a near-sure thing, and that they weren't doing anything *really* risky.

And banks and other big, sophisticated investors used structured finance to convince themselves (or at least their regulators) that they were investing, but not speculating. Even though it turned out that they were speculating, and that their risk models were crap, they didn't think so. So people at all levels treated their speculation in the housing bubble as safe and sensible investment, rather than as buying lottery tickets.