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The 1970s All Over Again?

10/12/2011 3:00 pm EST


Rich Karlgaard

Editor-at-Large, Forbes

Rich Karlgaard, publisher of Forbes, compares the recovery following the 1973-75 bear market to current times, and explains what that may mean for the technology sector going forward, in this exclusive interview with

A couple of years ago when you spoke at our San Francisco conference, you did a terrific job explaining how these mega periods of recession, these grand recessions, lead to grand restructuring. Could you elaborate on that, and also update us?

Sure, if you take a comparable recession…the 1973 and 1974 recession, where the drop in the stock market was similar to the one we went through from 2007 to 2009, about 50% in both cases, and the unemployment levels were similar. When you look at the recovery that followed, what you got was a very uneven recovery.

So in aggregate, we saw then and we’re seeing today this kind of slow growth, but that doesn’t tell the full story. The real story is that when you strip off the aggregate number, what you find is that pockets of the economy are doing very well, and pockets of the economy are suffering miserably.

All you have to do is look at it state by state basis. Here in California, we have 11% to 12% unemployment, Texas has 6% unemployment. That’s an example of the unevenness that we’re seeing in this post-Great Recession restructuring period.

So how does that lead to a restructuring in the overall economy, and what does it mean to different industries?

Well, particularly in technology, the downturn of 2007 to 2009, combined with the slow growth period, means that corporations are spending money, they’re piling up money, their balance sheets have never been better, their profits are great, but they’re not spending a lot of money. Particularly in technology they’re looking for new solutions that are faster and cheaper.

One of the restructurings you always see following a recession is the technology leadership category. In the 70s, we began to move from the mainframe era to the mini-computer era. In the 1990 and 1991 recession, we moved from the mini-computer era very abruptly to the personal computer and work station and client server era. Now we’re moving very abruptly to the consumerization of technology.

The iPhone has only been around four years. It’s incredible to think about the impact that it’s had on our life in four years. It’s cheap, it works extremely well, it doesn’t take a lot of service—corporations like that—and this is why Apple (AAPL) is making such inroads today.

Do you see Apple as a continued leader in this?

Yeah. Now, it’s dangerous to talk about Apple, because Apple has been on such a tear. Those of us who didn’t get into Apple, say ten years ago, are suspicious that we might have missed the best of Apple’s rise, and that’s true on a percentage basis, but it sure seems to me like Apple might be headed toward being the most valuable company on Earth.

That an American technology company would be on a valuation basis the most valuable company on Earth is not without precedent. Microsoft (MSFT) was the most valuable company on Earth a dozen years ago.

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