We've been talking as if after Y2K, all systems are in a shambles, causing uniform shrinkage of the economy and job losses. But many systems will be fine, and many good tools will exist for creating new systems. The older mainframe accounting package may be toast, but the your PC with Quickbooks is just as good as it ever was.

In a recession/depression environment, everyone gets cost conscious. If computers really do improve productivity (and I would say they definitely do!), then we could get in a situation where software automation of business processes really takes off. More back office systems for everyone, and retailers hit hard by discounters operating via the Internet.

After all, your company is on the ropes. You can't afford to hire lots of employees. To save money, you just have to become more efficient. Hold your nose and buy some more of that software. Cut back on retail staff, close branches, etc.

After the initial surge of Y2K fix work, programmers are freed up. Not that the work all gets done quickly, but many of the customers go bankrupt. A company can't wait a year for a critical system to get fixed, after all! The startups of the software industry all fail, without huge influxes of IPO-fed VC money and crazy valuations. So we see lots of programmers looking for work, and lots of work for cut-and-dried business applications. So custom software is cheaper and there's demand.

The long term, after 2001 or so, is that companies downsize and increase automation to cut costs. So what happens to unemployment? Especially in the retail area. A rich consumer wants someone to wait on them, to answer support questions, etc. A poor consumer just wants the best price. If that price is found online, or at a category-killer store, what happens to the local boutique shops, not to mention the few remaining Mom and Pop places?

A shrinking ecomomy combined with increasing productivity due to software could spell really nasty unemployment.

-- Michael Goodfellow (mgoodfel@best.com), August 15, 1999

Answers

Mad Monk,

Seems to me that Wal-Mart and K-Mart are masters of JIT and heavily dependent on efficient trucking and distribution of items from suppliers and warehouses to their stores. That could prove to be their Achilles Heel.

Ed

-- Ed Yourdon (HumptyDumptyY2K@yourdon.com), August 15, 1999.

You lay out a very plausible scenario but how's this for an alternative?

Many operations go out of business but instead of folding completely they are bought out by their employees who, of course, place a much higher value on full employment than on turning a profit (at least in the initial years). So in these businesses employment stays up and automation takes a backseat (at least temporarily).

-- dhg (dhgold@pacbell.net), August 15, 1999.

Where will the employees get the money to buy their company? If there is large scale business bankruptcy, there will be far larger personal bankruptcy as well. When the currently bloated stock market bubble bursts due to Y2K or just to exhaustion, millions of people are going to lose millions of dollars.

-- cody varian (cody@y2ksurvive.com), August 15, 1999.

Both of the above...

Basic commodities will continue to be sold by large discounters, such as Wal-Mart, K-Mart, etc. They (potentially) have the momentum and pricing to ride out the storm. They also have the constant demand for their products. Smaller organizations, specialty marketers, may go under or go to the internet. In a recession, demand will decrease for nice-to-have specialty items. What demand there is will be collected by the internet & traditional mail order houses (which also have internet branches).

-- Mad Monk (madmonk@hawaiian.net), August 15, 1999.

If the financial world stays afloat enough for WalMart to stay in business, then a lot of people will cash in their CDs and the banks are going to start calling in loans. There will be reduction of credit limits on credit cards, automobile companies will stop leasing cars, home equity loans will dry up, home purchase loans will be stringent.

Smaller more agile companies will thrive if they are able to read the changes and go with the flow, but the pie that will be there to share will be a lot smaller.

Products which are in stores may sell for pennies on the dollar, but no new goods will be sold into those stores at a loss.

-- Thom Gilligan (thomgill@eznet.net), August 15, 1999.

Ed- Agreed that JIT and supplier (including shipping) failures will nail Wal-Mart and K-Mart, too. But if supplier productivity is low (if a company can only make 40-60% of normal production), the larger companies can lean on the supplier to funnel all of their production to them...which further shuts out the small retailers. Also, small retailers typically have a level or two of middlemen between them and the suppliers. The large ones are more likely to buy direct, thus eliminating a couple of potential failure nodes. While I'm not buying Wal-Mart stock, I am certainly not counting them out, yet. Some large chains that aren't well-financed will most certainly go under. (IMNSHO)

Disclaimer: Since I live on the garden island of Kaua'i, I really only see our local K-Mart & Wal-Mart. Because of shipping limitations, these are probably somewhat atypical, and may carry a lartger than normal stock. Similarly, our supermarkets typically carry a 9 day supply of food...the barge has been known to not come due to winter storms, etc.

-- Mad Monk (madmonk@hawaiian.net), August 17, 1999.