A Korean shop holder selling Y2K preparedness packages at the end of the last century. Photo: Reuters
Before the turn of the century, Edward Yardeni spent years raising worldwide awareness of the Y2K-problem. When his predicted pandemonium failed to materialise, Yardeni dropped off the radar for almost a decade. Now, he is ready to speak out again.
Everything digital would collapse, causing death and destruction worldwide - or so those who feared the millenium bug predicted. The reasoning behind this, almost ten years ago, was internal clocks of the world’s computers were not built to understand the year 2000 (or Y2K) and would all jump from 1999 to 1900 at midnight, wreaking all sorts of havoc in their wake.
Nuclear missiles would launch automatically. There would be massive blackouts. The world financial system could shut down. Emergency services would fail en masse and air traffic controllers would be left helpless as planes fell from the skies.
In retrospect these predictions seems a bit far fetched. But the above list was actually summed up at hearing held by the American congress. The speaker: Edward Yardeni, then chief economist of Deutsche Bank Securities and the most famous Y2K alarmist in the world.
Yardeni’s reputation was impeccable. He attended both Yale and Cornell universities, worked for the US department of the treasury and the Federal Reserve. America’s largest newspaper, USA Today, called him the country’s most credible analyst. Yardeni even earned the honorific nickname “Wizard of Wall Street”.
Yardeni started speaking out on Y2K as early as 1997 and no one discussed the matter as much and as openly as he did. He spoke to the World Bank and the CIA, and he was a fixture at the annual forum of world leaders in Davos.
His dire words had an immediate effect. In the US, the White House formed a special task group, legislation was passed shielding companies from lawsuits emanating from the Y2K problem, insurance companies introduced special policies to cover the problem, and lawyers prepared themselves for a torrential flood of Y2K cases. According to the most conservative estimates, the American government spent 100 billion dollars fighting the problem.
So, what sort of horrible things happened in the end?
“Nothing. Perhaps two clocks showed the wrong date. It turned out to be completely uneventful.”
Some computer problems did occur though. In one casino, 150 slot machines broke down. The alarm system guarding an abandoned government building ceased to function, leaving its doors open that night. A client at a video store was charged thousands of dollars in late fees for a video more than a century overdue. Yardeni celebrated the new year at home, with his wife. When he woke up the following morning, the world was still there.
Afterwards, Yardeni quickly admitted he had been wrong and then withdrew from the public eye, remaining silent on the matter for a decade. Now, for the first time in almost ten years, he looks back on Y2K. Not on Wall Street. He doesn’t work there any more. Yardeni runs a small consulting firm from his home.
Your predictions did not materialise in the end.
“It is entirely possible that the problem never existed. It could also be that companies took action in time because people like myself sounded the alarm. In any case: when nothing happened and it turned out to have been a mistake all along, it was quite a relief.”
“I do blame myself for the fact that it seems the Y2K problem led to a recession. Quite a lot of money was pumped into computers to solve this problem. When nothing happened, that influx of cash dried up, contributing to the burst of the technology bubble.”
Does that mean you admit to contributing to the problem?
“It was never my intent to sow doom and gloom or cause depression. I am a family man and I don’t like to see people lose their jobs. But I did see a recession coming.”
At the time you called yourself “an alarmist”.
“I was trying to raise awareness because I felt business had to invest heavily in tackling this problem. Not because I thought people had to arm themselves or build bunkers. “
Still, your warnings had a seditious character.
“I was trying to garner attention – successfully I might add. Perhaps I stuck with it for too long. Maybe I should have called it proclaimed victory and called it quits six months before 2000.”
How could you have misjudged this problem?
“No doubt this was a major slip-up. The biggest in my career. Did computers end up breaking down? No. Did the recession I predicted occur? No. I admit to all that. But I do not regret a thing.”
But a lot of money was spent. The Wall Street Journal even said that an “end-of-the-world-cult” had perpetrated the “con of the century”.
“I think they were right about that,” Yardeni said, but after a moment’s reflection, he chose the offencive. “But if it really was a con-job, why did all those companies spent so much money?”
Perhaps because trustworthy authorities like you recommended it?
“Listen. Hold on. The executives in charge of major companies know what they’re doing. They won’t waste money on a false alarm.”
You are short-selling your own influence.
“I was not that important at all,’ Yardeni said, again pausing for reflection. “Perhaps I was credible and I had a good reputation – I still do, I think – but I did not invent Y2K. Besides, people were working on this day and night. They took it so seriously they spent a lot of money on it.
Some countries – Russia, Germany, and Italy – stood out because they spent no money at all.
“Yes”
And nothing went wrong there at the year’s end.
“Exactly.”
So what does that mean?
“That computers weren’t essential to those countries.”
What Edward Yardeni said in 1999
- “The communications’ systems of half of the world’s countries are at risk of imminent collapse.”
- “I am no longer certain that we have enough time to prevent a Y2K-recession.”
- “There is a 70 percent chance of a worldwide recession at least a serious as the one we had in 1973 and 1974.”
- “It worries me that nobody on this planet is trying to assess the consequences the computer problem might have for the worldwide food supply...it might be seriously disrupted.”
- “This is the American Titanic. There is an iceberg up ahead and we are still partying on the upper deck.”
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