Detroit and Buggy Whips

Back in the days when personal computers, internet use and e-mail was in the process of becoming ubiquitous—not so very long ago—I heard a lot of talk about buggy-whips. In the business I was in at the time, graphic design and typesetting, we had a somewhat haughty opinion about all this new-fangled technology, allowing the untrained and untalented to produce amazingly ungainly advertising and marketing materials.

“You are the buggy-whip manufacturers of the information age,” someone told me about my business.

I didn’t really have a lot of choice. My company had sunk thousands into technology that was becoming obsolete in front of our eyes. We held equipment contracts that would obligate payment for years based on a business model that would not sustain us until the end of the contracts. Nothing was keeping our clients from migrating to brand-new companies that could do what we did faster and at a lower cost, even if it didn't meet our overblown standards for "art." Already under-capitalized, our little company didn’t last much longer.

It was a business object lesson: Ignore new technology at your own risk.

Today, our own beloved Detroit manufacturers risk becoming the buggy-whip manufacturer’s of the 21st century. I say “beloved” because the U.S. is acting a lot like I was in the face of new technology. We’ve built our economy—and much of our foreign policy—on foreign oil reserves, which, because of its limited supply and its polluting characteristics, we cannot sustain much longer. But we have to love it; it defines America-as-we-know-it. And here we are, poised at the brink of spending billions of dollars to provide capital to companies that have ignored the facts of the market and the environment in favor of relatively short-term profits.

I’m not just old enough to remember the advent of PCs and the Internet, I’m also old enough to remember sitting in gas lines during the oil crises of the ’70s. Back then, it seemed like it took about a hot second for foreign auto manufacturers to flood the market with small, fuel-efficient vehicles, providing U.S. car buyers what Detroit wasn’t. Suddenly, the roads were filled with shiny new Datsuns and Toyotas.

It’s amazing how short our memories are. Fast forward to the ’90s and Detroit’s ultimate boondoggle for American consumers: The Hummer. Bigger than anything ever sold outside of military applications, at an average price of around $48,000 the Hummer also cost more than most Americans make in a year. But that wasn’t a problem for Detroit or the credit industry: just extend the average car loan repayments from three to four to five and even six years. Crazy.

Today, New York Times Pulitzer Prizing winning columnist Thomas Friedman writes about a new “mobility” business model coming out of Palo Alto, Calif., which Detroit pooh-poohed—presumably because the company, called Better Place, based the model on electric cars, not oil-burners. Friedman’s not sure if the model is viable, but, as he says, “Whatever can be done, will be done” in this age of the integrated, digitized, globalized marketplace.

I can’t help thinking about the typesetting industry… and buggy whips. Better Place announced a test market deal with the state of Hawaii, and is in negotiations with Israel, Australia, the San Francisco Bay area and Denmark. If this new-fangled model works, Friedman says, history will not look kindly on our handing Detroit several billion dollars to keep them afloat for a few months:

“[O]ur bailout of Detroit will be remembered as the equivalent of pouring billions of dollars of taxpayer money into the mail-order-catalogue business on the eve of the birth of eBay. It will be remembered as pouring billions of dollars into the CD music business on the eve of the birth of the iPod and iTunes. It will be remembered as pouring billions of dollars into a book-store chain on the eve of the birth of Amazon.com and the Kindle. It will be remembered as pouring billions of dollars into improving typewriters on the eve of the birth of the PC and the Internet.”

New century, new paradigm. The age of the Detroit auto industry is about to go the way of buggy whips. Feel free to say you read it here first.