Digital Chip Is Real Hope for Video Industry
Sometimes it’s hard to be an optimist.
Things looked bad last week when a group of 36 companies in the electronics and computer fields asked the government for $350 million in grants and $1 billion in loans so they could develop an American version of high-definition television--the coming consumer wonder from Japan. These were not puny outfits; IBM, AT&T;, Hewlett Packard and Apple Computer were among the 36. So skeptics in Congress asked the obvious question: If this is a good business, why don’t the companies invest their own money?
“Unfortunately,” was the response, “there is no way to generate all that capital through private sources.”
How times have changed. Half a century ago, it was not 36 companies or government money that developed commercial television in the United States, but one man, an immigrant from Czarist Russia named David Sarnoff who rose to become head of RCA (and NBC.) In the 1930s, Sarnoff’s company invested $20 million over nine years to develop a television system that he previewed at the New York World’s Fair in 1939. Later, after World War II, Sarnoff again invested heavily to develop color television.
Unfortunately, after Sarnoff--who died in 1971--the U.S. stopped developing television, so now a whole abandoned industry must be rebuilt for high-definition TV.
Not all is dark, to be sure. Things look worse in consumer goods than in other areas where U.S. enterprise is as inventive as ever. But the reluctance of private investment to back long-term projects is so widespread as to be the rule, not the exception, these days.
‘Very Uncertain Today’
U.S. business blames the short-term focus of financial markets when it can’t invest in new ventures. But the same excuses--budgets are tight, money is scarce--are used to explain why we can’t improve American education or deal with social problems.
Yet everybody can see $25 billion splashed around in a single leveraged buyout. How does that add up?
It adds up in the minds of financiers and lawyers who have great influence over industry’s investment plans. Two such men, the head of a New York law firm and the chairman of a Wall Street investment house, recently spoke privately of how it is in the markets today.
Long-term technological projects? “Let the government do those things,” said the lawyer, a specialist in takeovers. “It’s very uncertain today. It may take three or four years to build a new plant, and how do you know what the market will be like when the plant opens?” Fearing the future, these men prefer an immediate payoff. So they advise companies to pay out capital in the form of dividends or to undergo leveraged buyouts, which also “distribute money into our economy.”
These experts may not know it but what they favor is a form of economic error that the great British economist John Maynard Keynes called “the liquidity fetish” when he wrote of it in 1936. “Of all the maxims of finance, none is more antisocial than the liquidity fetish,” wrote Keynes. “It forgets that there is no such thing as liquidity of investments for the community as a whole.” He meant that children need schooling and people need jobs, so communities--and industries--must build for the future. “Things are serious when enterprise becomes a bubble on a whirlpool of speculation,” wrote Keynes, as if foreseeing the markets of today.
But just as David Sarnoff was developing television when Keynes wrote that in 1936, so there is hope today.
The 36 companies grouped in the American Electronics Assn. are not looking for a mere handout but for help with advances in semiconductors and video screens and graphics. They intend to match the government’s money with their own, and their focus is firmly on areas where technology is being developed in the United States.
You wouldn’t know it but the hottest thing in video today is not high-definition TV but interactive video computer programs, such as Intel’s DVI chip set. DVI is a complex of semiconductors that allows users to interact with a full-motion video picture on a personal computer screen. That is, in a presentation by an office or home decorator, the customer can move things around the pictured room; in schools, youngsters can roam around historic ruins or examine three-dimensional representations. The DuPont chemical company will buy a DVI set next month to use as a simulator to train truck drivers.
Who developed this wonder product that is part of U.S. industry’s real promise for the video future? Well, you might say the continuing tradition of American enterprise developed it. Intel, the semiconductor company, is developing DVI now, having bought it for $20 million from General Electric, which in turn inherited DVI with its 1986 purchase of RCA. The technology was first developed at the Princeton, N.J.’s David Sarnoff Research Center--which was named, of course, for the father of U.S. television.
Optimism may come hard, but it sometimes makes sense.
