"How could we have been so stupid?" In the old new economy, the woman who asked this question was a heroine of sorts, one of those feisty young dot-commers with stock options, mobility and sought-after skills. But the "new" is over now, those great jobs have vanished and many such heroes are asking themselves the same thing.
After all, the technology industry was considered largely immune from the "creative destruction" that was destroying, creatively, the old economy. Sure, a company here or there might fail, but high-tech was going to work out capitalism's kinks, if not save America altogether from its otherwise wheezing economy. Manufacturing might be devastated, with blue-collar wages plummeting and dead-end service-sector jobs booming. But tech workers from Silicon Valley to Silicon Alley were the cream of the crop, the highly skilled workers who learned computer technologies quickly and adapted to uncertainty eagerly. Unlike the rest of us rubes, they were making the changes and taking the chances that were supposed to pay off big.
Today, tech companies (and tech workers' stock holdings) are a dime a dozen. The best jobs created in post-industrial America have vanished. Rather than providing a quick techno-fix to the increasing insecurity and decreasing benefits so prevalent in the larger economy, the tech industry turned out to be part of the problem.
But risk and insecurity were always at the center of the new economy. Today, when bubble mania has become so linked to the phrase "new economy," it's hard to remember that it once meant a Faustian bargain between labor and capital. Ten years ago -- before Web browsers or Internet stocks -- Bill Clinton's Democratic Party platform used the phrase "new covenant" to describe a social compact for today's America. Workers would accept "added responsibilities" and join in "cooperative efforts to increase productivity, flexibility and quality" in exchange "for an increased voice and greater stake in the success of their enterprises."
Increased flexibility was the magic bullet, a boon to employers and employees alike. Unencumbered by the rigidities of union work rules or responsibilities to labor, companies could grow leaner, meaner, more productive and more profitable. And they would share that bounty with their leaner, if not necessarily meaner, workforce. Nowhere was this trade-off more explicit than in the rapidly growing technology industry, where ordinary workers could set their own hours and grow rich by having a stake in the company's success.
Who really benefited, though, from this hype-heavy harmonization? There may have been some secretaries at Microsoft who retired early on their stock-market windfalls, but for most tech workers, stock options weren't really an option. Very few companies had broad-based stock-option plans -- and even fewer of those experienced the kind of stock-price growth that made ordinary employees wealthy. Nor, for that matter, did they want to be weighed down with that many ordinary employees. Even as boardrooms were increasing the number of stock options available to their top officers, they were appeasing Wall Street's demands for higher share prices by employing fewer permanent workers, outsourcing nonessential functions and trimming middle management. (Indeed, throughout the go-go 1990s, Wall Street itself never fully regained the number of jobs it sloughed off after the 1980s.) Labor costs, after all, hurt the bottom line.
But what about all those Horatio Algers who went to work in the tech sector when the bubble was still bubbling? Was it the frisson of risk and the prospect of quick rewards that sent them storming into the new economy? In the course of my research on risk and uncertainty in New York's Internet industry, I talked to scores of young dot-commers, before and after the crash, about the choices they've made. Theirs was a group that had more career options than most: Dot-commers were young (in New York, 70 percent were under 40), highly educated (a third had at least master's degrees) and, judging from the people I interviewed, had the wit and manners of the well-bred and creatively ambitious.
Some indeed fit the image of young, enterprising go-getters trying to get rich on the next big thing. A 28-year-old senior project manager with one of New York's top Internet companies was getting ready to leave his third job in less than a year and a half. He thought he was on the "fast track" because he was "willing and able to absorb the higher risks and therefore reap the higher rewards." A 44-year-old aerospace engineer turned start-up programmer thought he'd end up "just a worker bee" if he didn't gamble big with risky enterprises.
The overwhelming majority of those I interviewed, though, were less enthusiastic about this sort of entrepreneurialism they were forced into by their jobs. They took the risks associated with a new industry because they were looking for work that was more interesting, offered more opportunities or seemed more flexible than their other options. Moreover, by taking risks in an untested industry, these workers didn't so much take a chance to strike it rich as they had little or nothing to lose.
Some, like a 28-year-old junior producer, did their research carefully before deciding to join the dot-com revolution, picking seemingly stable companies that at least had revenues. The producer had been in book publishing and wanted to "go someplace with more opportunities, someplace that could lead somewhere else." He didn't put any of his own cash into his dot-com firm (as other more entrepreneurial sorts did), nor was he working in some kid's garage. The only thing he had to lose, he felt, was a spot on publishing's career ladder that seemed rickety compared with the dot-com's. He was hired the month that the technology crash started; he was laid off from his first (and, to date, last) dot-com job exactly eight months later. Others described their tech jobs as a fortunate but accidental "big step up" (in the words of a 30-year-old producer) that, though risky, was actually more stable than the string of waitress or temp jobs several of them had previously held.
Waitress or IT job? While the Financial Times last year mocked those going from "dot-com to garçon," technology, in fact, is right there with low-end service industries as the sector likely to have the fastest-growing number of jobs in the next 10 years, according to U.S. Bureau of Labor Statistics projections. Correspondingly, it's now clear that the technology industry offers about as much job security as low-end service work. The pay and perks are better, but high-end service jobs are every bit as expendable as low-end ones. All of the tech workers quoted above were either laid off or "opted out" (as one put it) of the industry's turmoil. More than a third of Seattle-area high-tech workers are currently unemployed, according to a study released this summer by the Washington Alliance of Technology Workers, a Seattle-based union that tries to organize high-tech workers. During the last two years, more than 150,000 dot-com jobs have been slashed nationally, which is about the same number of jobs there were in New York's entire Internet industry at the height of the boom.
For a time, though, tech workers made taking risks look easy and flexible work look like fun. Many felt involved in the decisions of their companies and believed that their commitment would be compensated. At least they did until the stock market meltdown, when even their skills and savvy networking could not buffer them from a new round of layoffs (from the very companies in which they were supposed to have a stake). As one of the laid-off dot-commers discovered, "You're all family until you're not."
From the beginning, the new economy struck a bargain with American workers who were offered riskier employment in exchange for a shot at sharing in their companies' success. What workers learned is that when gambling with American business, the house always wins. How could any of us have been so stupid to think otherwise?