Technology and the American Economy: The Tale of the Slinky
With Neil Irwin
Post Staff Writer
Monday, Jan. 14, 2002; 2:30 p.m. EST

Flighty dot-coms may have gotten all the attention during the technology boom of the late 1990s, but the lasting impact of the digital revolution may well be in the boring, old-line industrial companies. To understand how digital technology has upended the American economy, Post Staff writer Neil Irwin took an unorthodox approach.

Irwin tagged along through the supply, production, and distribution of a Slinky toy in order to explain those changes. From a junkyard in Florida to a steel mill in Texas to the cab of an eighteen-wheeler to a warehouse in New Jersey, Irwin found a world utterly transformed by computing advances. At the same time, though, he found that some of the most ambitious claims of technology boosters haven't borne fruit, which will make it difficult for the U.S. to match the stunning economic expansion of the late 1990s and first part of 2000 anytime soon. Nonetheless, the Slinky's path, frivolous though it may seem, shows a fundamentally American passion for what is new that drove the tech boom and bust--and will put the nation in good stead for the future. Read his article This Little Slinky Goes to Market (Post, Jan. 13, 2002).

Below is the transcript.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

Neil Irwin: Welcome to the chat, and thanks for the questions. Looks like we're up against the child genius in the first half hour and Carolyn Hax in the second half hour. While I can offer neither floppy blonde hair nor snappy retorts to your personal problems, I'd welcome your thoughts on technological innovation, the economy as a whole, or Slinkys in particular.

Arlington, Va.: I can't imagine any line of business that wouldn't improve with the efficiency provided by computers. But why would anybody think computers themselves were the end-all be-all to a business' challenge? The assembly line wasn't. Did you meet anyone who was "dissappointed" with the march of progress?

Neil Irwin: You're right that virtually every business has been able to improve through computers. As for why people got punch drunk on the new possibility, I think it traces to something fundamental about the American character (pretension alert...) We get so excited about the Next Big Thing to such a degree that we believe anything is possible. The reality is, change is slow and difficult and unpredictable. Some people are disappointed with the march of progress--namely, the people who expected it to be the sprint of progress.

Arlington, Va.: Was it cool in the slinky factory or what? And is there still as big of a demand for slinkies these days?

Neil Irwin: Totally cool inside the Slinky factory. For a tech reporter who was accustomed to visiting office buildings in Reston, to see real live machines shaping steel and--get this--Slinkys walking into their own boxes--was great fun.

Actually, a recurring theme for me when reporting this story--whether visiting steel factories or riding with a trucker or going to a warehouse--was to be impressed with all these people who do Real Work, unlike those of us who sit around writing articles about toys and the economy for a living.

Demand for Slinkys remains steady, the company's owner told me. It's not a product with volatile demand.

Arlington, Va.: Philosophical question for you: some have worried that technology will make the human worker obsolete. But we saw with the boom of the last few years that technology can actually lead to lower unemployment. Do you think this debate is now dead?

Neil Irwin: What's that they say: Old debates never die, they just fade away.

I think the people who argue (or argued) that human workers would be rendered obsolete by technology have a fundamental misunderstanding of how the economy and technological innovation works.

The ultimate goal of having an economy is for people to be able to consume as many goods and services as possible--specifically those goods and services that give them the most pleasure. New technologies allow the same people to create more goods and services--and by definition, a society that produces more can consume more. So, new technology, whether textile mills in 19th century England or business software today, may result in temporary hard times and unemployment as workers must find new kinds of work (as with steelworkers circa 2002), but ultimately those people can and will go to work making more stuff also taking advantage of that technology.

Sorry for the long-winded answer. Any neo-Luddites out there interested in arguing the opposite?

Woodbridge, Va.: I have two questions. First, from your trip with the slinky and all you know about technology, do you think we are at a technological standstill and what can be done to get moving again.

Second, did you get any free slinkies?

Neil Irwin: Technological standstill is probably too strong a term, based on my reporting. There are lots of companies out there figuring out fantastically innovative ways to use computers to do things better. But the pace of things, my reporting suggests, has slowed from the halcyon years of the late 1990s. Innovation moves in spurts and lags, and we may very well be in the final years of a pretty remarkable spurt.

I received a blue Slinky, imprinted with the Bekaert Corp. logo, from the steel wire supplier. The people who sit near me are, I suspect, tired of hearing the clanging sound as I run it through my fingers day-in, day-out. I suppose now that the article is done I should give it to the childrens' hospital so as to comply with the Post's ethics policy!

Reston, Va: I've worked, as a programmer, in industrial automation. It was interesting to see that an automated line didn't result in people losing their jobe, just fewer new people being hired. The old system was usually kept in place to do custom or r&d work.

Putting the lines in was interesting as well. Sitting, with an oscilloscope in my hand, on a hoist, over a tank of sulphuric acid, in Oklahoma, in August, during a heat wave. Thinking to myself that this aspect of debugging wasn't mentioned in college.

Neil Irwin: Interesting thoughts. Thanks. Re: hovering over acid during an Oklahoma heat wave, I have only some idea what this must have been like. I visited the Texas steel factory in I think July, and the areas where molten steel is processed felt like ovens. The room nearest the furnace gets to 140 degrees in the summer.

Fairfax, Va.: Some times it isn't a failure of technology, but a company's failure to find (and buy) and implement the right technology. Did you find any egregious holes in Slinky's system that you thought could be patched?

Neil Irwin: I wouldn't claim to see uses of technology that the companies themselves don't. Obviously, there are plenty of theoretical ways that these companies might squeeze more efficiencies out, but their executives have generally investigated those possibilities and found that their benefits just don't outweigh the often huge costs involved.

There were some things I expected to see more of along the way. For example, after all the hype about business-to-business Internet exchanges, I figured somebody along the way would be buying their supplies through one of these. The only example of that I found was that the steelmakers buy a small portion of their raw ingredient, called pig iron, from abroad using an Internet exchange. But the predictions that virtually every transaction between businesses would be conducted over the Internet by 2002 or so seem to have been woefully wrong.

Overall, though, I guess I have more faith in corporate executives' ability to evaluate new technology and only spend on things that are worth the money than you do. Thanks for the question.

wiredog: Was the slinky story your idea, or was it an assignment the editor tossed in your lap? If the latter, were people fighting over it?

Neil Irwin: It was my idea. I covered Internet companies at the time, and was sitting around scratching my head wondering how to explain how technology has changed corproate America to a mass (i.e., non-technical) audience. Nothing makes people flip the page faster than a headline with the words "supply chain management" in it. So, I got the idea of following one item through its supply chain to explain the tech revolution. After researching some different possibilities of what item to follow (a crayon was among the rejects), I settled on the Slinky. And editors here in the business section, generously enough, let me pursue it and approved unusual expense report items like "dinner with David Colby, truck driver, King of the Hill Steakhouse, Bentleyville, Pa."

Somewhere, Md.: Is it possible for visitors to tour the Slinky plant in Pennsylvania? I am an a student in an engineering society and this sounds like a great plant tour for our group.

Neil Irwin: I don't know if they allow tours at the factory. I do know there is a Slinky museum in Hollidaysburg, a suburb of Altoona. The company's factory in Hollidaysburg is at 814-695-5681.

Washington, D.C.: Who are Slinky's competitors? I mean, really, that company could probably survive just fine without spending one dime on automation and computers.

Neil Irwin: Their competitor is really any other item that receives shelf space at Wal-Mart, Target, Toys R Us, etc. The company's owner, Ray Dallavecchia, told me that if Slinkys are on a shelf, they tend to sell. The hard part is persuading retailers to give them enough shelf and display space that browsers actually notice the Slinkys and then buy them.

The company perhaps could survive without automation, but the goal of a company is to maximize its profit--and to do that, even a company like Poof Products has to spend money on technology to a degree. What they've done is apply a skeptical eye toward technology spending. They couldn't find a new design for Slinky manufacturing machines that would be as efficient as the 55 year old machines, so haven't built any new ones. Ray told me he dreams of a day when the steel wire arrives at the plant, the Slinkys are made, and then sent out to retailers all in a couple of days, rather than the current situation where stuff sits in inventory, often for weeks. But the kinds of tools that would help acheive that, supply chain management (to go back to an offputting piece of jargon), and such, would cost more than it would save on the cost of carrying inventory.

Bethesda, Md.: How has Slinky's workforce fared through all of this. Were people let go, i.e., replaced?

Neil Irwin: They haven't, actually. In a way, the company is a throwback. Many of the workers have been their for decades (I don't remember the exact number, but I believe I was told the average length of service was 30 years or so). And Betty James very much didn't want to lay people off. She sold the company to Poof Products in 1998 in part because Ray Dallavecchia, its owner, agreed to keep the factory in Pennsylvania open.

Neil Irwin: That said, there are certainly workers across the country who have been displaced by technological innovation. But often, that problem is oupaced by new growth that that innovation allows. For example, 15 years ago, every big company hired "word processors," full-time people who would type letters and other documents for the rest of the staff. Now, with a PC on every desk, we all do our own word processing. One could say that those human word processors lost their jobs becuase of evil technological innovation. In reality, there are many more jobs for clerical workers now, clerical workers whose time is better spent, than there were just a few years ago.

Washington, D.C.: In comparison to tech companies, what did you find the most interesting aspect in the survival of the Slinky company?

Neil Irwin: There may be some lessons there that folks in DC techland would do well to remember. Patience is probably the most important. Even with a good idea, it took 20 years for the Slinky makers to become stable. Perserverence is certainly the other lesson. When her husband left to join a cult in 1960, taking much of the family's money with him, James Industries was on the cusp of bankruptcy. She negotiated with creditors, any of whom could have forced the company into bankruptcy. She built the company back to become strong and profitable. Perhaps minor inspiration to any tech folks trying to forestall bankruptcy right now. Of course, she didn't hadn't spent millions of dollars of venture capital money to get there. But still...

Silver Spring, Md.: The Slinky is a relatively simple object, even if the process of making one is not all that simple, as your article so wonderfully demonstrates. Presumably, the manufacture of more complex objects involves many more steps and processes. Based on your research for the article, what is the likelihood that finding more technological efficiencies in the process of manufacturing more complex objects would be enough to sustain the rate of productivity growth that we saw in the '90s?

Neil Irwin: It'll be tough. There are some economists and theorists out there (and Alan Greenspan is one of them, as he restated in a speech Friday) who believe that we're on the cusp of more great innovations. Among the factors they cite: "network effects," meaning that just as a fax machine is more valuable when everyone has one than when just two people have one, ever-expanding uses of digital data will beget more efficiencies.

My reporting for this story made me skeptical. All along the way, when I asked companies about what comes next in technology investment, they would describe this and that project they were excited about. But when I asked a simple question: Do you expect the efficiency gains from these next projects to be equal to gains you've experienced in the past ten years?, they almost universally said, no, it will be a slower and more subtle affect on our business.

Who knows--the businesses I've been talking to might not be representative, or their predictions might be wrong. But I wouldn't be surprised if we eventually come to realize the 1990s as a pretty unusual spurt in productivity

Tampa, Fla.: Do the steel rods really fly out of the steel processing machine at 195 mph?

Neil Irwin: Sure does. It comes out in big loops, though, which made it possible for the workers (before infrared scanners) to measure the rod with calipers.

Virginia: The Slinky company could well be the role model of the American economy just like Ford and Coca Cola. But don't you think that mass production is somewhat of a precursor to digital revolution? We make mass quantities with machines, and using technology is also to create more with a smarter qualitative product like computers or digital equipment.

Alongside the original steel slinky, the slinky is changed to plastic or maybe a digital slinky, ie games.

Neil Irwin: Interesting point. I'll let economic historians debate whether mass production or digital technology is more significant in shaping how we live and work, but there's no question that both have parallels in how deeply they've changed society. The everyday conveniences we take for granted now--the automobile, air conditioners, you name it--was made possible by mass production and the assembly line. In 20 years, we may very well say the same thing about technology rooted in the microprocessor.

Neil Irwin: We'll close up there. Thanks to everyone for the great questions.

washingtonpost.com:

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