by Richard Pastore

Here Comes the IT Buildout

Jan 01, 20033 mins
Data Center

As we enter year three of the IT doldrums, one can be forgiven for bowing to the pessimistic view that IT has had its day in the sun and we have awoken in the gray dawn of a permanently depressed industry. Wrong! It’s just one hell of a hangover, says economist W. Brian Arthur. “We had a huge party in the late 1990s,” he says. “Now it’s time to get up out of bed and begin a solid, serious technology buildout.”

A buildout? While most companies are still battening down? Yes, says Arthur, 57, the Belfast, Ireland-born Citibank professor at the Santa Fe Institute in Santa Fe, N.M. A professed technophobe, Arthur has made a study of past technology revolutions?transportation, power, raw materials and manufacturing processes?and says this history, dating back to the 18th century, reveals parallels to our IT revolution, complete with crashes caused by speculation, overexpansion and the irrational exuberance of investors. In each case, he says, the crash was followed by a massive buildout, leading to a golden age. (See for a full explanation of these historical patterns.)

Arthur believes 2003 will be the staging year for the IT revolution’s buildout. “Devices continue to be bought and used,” he argues. “We continue to see productivity gains.” One analogy is to the railroad industry. Rail stocks became anathema in the depression of 1859, when the nation had about 30,000 miles of track. “But the trains kept running, and the [industry] started to construct again,” he says. By 1914, there were 253,000 miles of track.

For the IT sector, the big post-crash change is that demand has replaced greed as the driver for growth. “In 2003, the sector will be driven much more by demand for what’s needed in industry,” says Arthur. “Investment will follow rather than lead.” That shift, he says, means we have developed the sobriety necessary for a sustainable buildout. “I don’t think the IT sector will ever fully get its glamour back, and that’s not a bad thing,” he adds.

With the IT equivalent of 223,000 miles of track to be laid, we’re going to need a lot of track bed?that is, infrastructure. Just as the Eisenhower Interstate Highway System made it easy for people to drive long distances, ushering in the automobile industry’s golden age, broadband will pave the road to IT’s buildout, according to Arthur. Universally available wireless and fiber connections will provide the capacity to transmit messages almost instantaneously across effectively infinite channels.

But, you say, broadband faces numerous obstacles. Even its proponents don’t want to pay for that last-mile connection to our homes. “This is history repeating,” says Arthur. “By the 1940s, we knew how to build highways, but there was no single firm or group of consumers who could make it happen. Roosevelt tried to launch a highway system in 1938, but the states didn’t want to pay.” There are also political barriers to broadband: Content providers worry they’ll suffer losses to piracy. “Broadband will not fully arrive until these parties get together and come to an agreement. And that’s not going to happen outside of Washington,” Arthur says. “Heads need to be knocked.”

Arthur’s analysis underscores how short our economic memories are. “We continue to be surprised that so much of what happened hundreds of years ago repeats now when we think we’re so modern and different,” he says. “I do wish I had looked into this earlier. If I had, I might have seen this crash coming.”