Does information have value? - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 5 April 2013
Does information have value? A  A  A

Sao Paolo, Brazil

Nothing much on Wall Street. Dow up ... gold flat.

Hey...where's all that internet wealth when you need it?

The Daily Mail, London:

    U.S. sees highest poverty spike since the 1960s, leaving 50 million Americans poor...

    The number of Americans living in poverty has spiked to levels not seen since the mid 1960s, classing 20 per cent of the country's children as poor.

    It comes at a time when government spending cuts of $85 billion have kicked in after feuding Democrats and Republicans failed to agree on a better plan for addressing the national deficit.

    The cuts will directly affect 50 million Americans living below the poverty income line and reduce their chances of finding work and a better life.

    As President Barack Obama began his second term in January, nearly 50 million Americans - one in six - were living below the income line that defines poverty, according to the bureau. A family of four that earns less than $23,021 a year is listed as living in poverty.
The paper illustrates its bleeding heart story with a ridiculous example, taken from the streets of Baltimore. A Mr. Antonio Hammond abandoned his children for 20 years...and stole copper pipes and other things to support a full-time drug habit. "All I wanted to do was to get high," he says.

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Then, he kicked the habit and got a job at $13 an hour. Now, he's a success story. And if you believe The Daily Mail, cuts to the federal budget may make it harder for people like Mr. Hammond to escape from poverty.

Seems much more likely to us that cuts to federal spending will help get people like Mr. Hammond back on their own two feet; the feds won't have the funds to keep him in poverty. Baltimore has been fighting poverty for the last 50 years, ever since Lyndon Johnson declared war on it in the '60s. Spending has gone up and up...blasting away at poverty with hundreds of billions of dollars. But now Baltimore has more poor people than ever - one in four residents is below the poverty line, according to the Mail. And no wonder. When poverty pays, why take up something else?

But what we wonder is how come there are so many poor people? Wasn't the internet supposed to make us all rich? Even Mr. Hammond can now go on-line and discover the secrets of business and science. He can know as much about economics as Ben Bernanke. He can know as much as Nancy Pelosi about politics. He can know as much about journalism as Tom Friedman.

So how come they get the big bucks and he doesn't? How come a man who can know almost everything settles for just $13 an hour? Is that all omniscience is worth?

Back at the end of the '90s, we ran into people who thought the internet changed everything. With so much information at everyone's fingertips, they thought they saw a brave new world coming. We would all have access to the information we needed to increase productivity and add wealth. No one would be poor again. All they would have to do is to go on the internet to find out how to get rich.

We were suspicious of these claims back then. Information is cheap, we pointed out. It's wisdom that is dear, and you don't get much of that on the internet. You have to pay for it...with bitter experience.

In fact, information - unless it is exactly what you need, exactly when you need it - has negative value. It distracts you. It must be applied. And stored.

How much good would it have done Napoleon - on his disastrous retreat from Moscow - to have the plans for a nuclear weapon? Suppose Louis XVI, mounting the scaffold to the guillotine, had had proof that Franco and Vanzetti were innocent! Imagine whispering to Hugo Chavez, as he lay on his death bed: 'studies show that people who eat less meat have less cancer.'

No, dear reader, information is like manure. A little, at the right time, is a good thing. Pile up too much and it stinks.

And now, we have proof...that the internet did not add to the wealth of the US...or apparently anywhere else. The New York Times magazine:
    For a time, the Labor Department's productivity figures appeared to support the idea of an Internet-based productivity miracle. Between 1996 and 2000, output per hour in the non-farm business sector-the standard measure of labor productivity-grew at an annual rate of 2.75 per cent, well above the 1.5 per cent rate that was seen between 1973 and 1996. The difference between 1.5 per cent annual productivity growth and and 2.75 per cent growth is enormous. With 2.75 per cent growth (assuming higher productivity leads to higher wages) it takes about twenty-six years for living standards to double. With 1.5 per cent growth, it takes a lot longer-forty-eight years-for living standards to double.

    [But...] since the start of 2005, productivity growth has fallen all the way back to the levels seen before the Web was commercialized, and before smart phones were invented. During the eight years from 2005 to 2012, output per hour expanded at an annual rate of just 1.5 per cent-the same as it grew between 1973 and 1996. More recently, productivity growth has been lower still. In 2011, output per hour rose by a mere 0.6 per cent, according to the latest update from the Labor Department, and last year there was more of the same: an increase of just 0.7 per cent. In the last quarter of 2012, output per hour actually fell, at an annual rate of 1.9 per cent. Americans got less productive-or so the figures said.

    ...if the sluggish rates of productivity growth we've seen over the past two years were to persist into the indefinite future, it would take more than a hundred years for output-per-person and living standards to double.
How about that? The internet. A big dud. A time television, not a wealth booster, like the internal combustion engine.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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2 Responses to "Does information have value?"

Om Prakash Sharma

Apr 7, 2013

No Sir Internet is not all that bad. It is how the people happen to use it. Use it judiciously it is of great value. So is television. If one wants to be criminal it helps him too but not every one wants to be criminal. Social sites are though a wastage of resources and produces more pollution than any Industry


ruk dave

Apr 7, 2013

Exactly Correct the internet takes away lot many working hours. People in office see porno. the young ones are also not an exception. The films, the videos, the facebook and other like-ones, are the traps for time killing. How many percentage of people would be using internet for knowledge? And for them also what is the percentage of knowledge gathering hours to the total hours they spent on internet?

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