Digital Matters - Issue 53

Fear, says John Ellis, is the new market psychographic. Get ready for economic changes that require a whole new logic.

If you stand on the platform at the Ardsley train station, 22 miles north of New York, you can look down the Hudson River to the tip of southern Manhattan. What you used to see on a clear day or night were the twin towers of the World Trade Center. They were beautiful at night. They are no longer.

New York was enveloped by sadness in the weeks that followed September 11 -- a sense of loss that remains overwhelming and acute. There were few remains and little hope for the missing. All that was left was what rescue workers called "Dante's inferno." To see it with your own eyes was beyond belief.

The myth of American exceptionalism shattered, and the new, new thing emerged. We are, all of us now, citizens of the Age of Fear. Unimaginable horror can be seen in a suitcase, in a glass of water, in the ventilation system of an office building. To view these things as potential threats was considered paranoid, pre-September 11. It is now considered prudent.

What the Age of Fear means is that fear is the new market psychographic. Companies will continue to advertise their brand-name products to the hilt. But the next new economy will be about safety and/or escapism. The capital expenditures of established companies and the venture capital that creates companies will be directed at products and services that make life safer or more secure. Consumer-product development will be focused on the cocooned, anxiety-attacked customer.

Cosmetics will still sell, but they'll sell a whole lot better if they're known to contain an epidemiological vaccine for smallpox. Software and routers will still be sold to the government, but the sale will close faster if the purported point is to make airports safer and identity checks (fingerprints, retinal scans) faster. Genomic science will continue to enable man to gain control over the evolution of all living things, but it will attract more investment and federal funding faster if its stated purpose is to understand pathogens and chemical warfare.

Before September 11, the debate among business and financial strategists was, roughly stated, nanotechnology versus genomics/proteomics. Which will be the next big thing? Where would you put your money? The best minds at Goldman Sachs, Merrill Lynch, Morgan Stanley, and Citigroup wrestled with these questions, as did those at the country's venture firms.

After the stock market began "correcting" itself in April 2000, a ton of money moved to the sidelines -- into cash accounts that were paying 4.5% and 5%. This was more sidelined cash than at almost any other time in our history and certainly more in the aggregate than at any other time in the history of mankind. The money just sat there, waiting to go to work.

Now it knows where to go. It will go into the market created by the Age of Fear. This is not all bad. For one thing, it ensures that the "last mile" of broadband will finally be built out. It's no longer a matter of the inconvenient slowness of a 56K modem over a copper telephone wire. It's now a matter of national security. Second, it ensures that genetic identity cards (and therefore the genomics industry required to enable such things) will become a reality in the near (or nearer) future. Third, it means that vast sums of money will be poured into voice-recognition technology, which is the fourth leg of the identity stool. (Fingerprints, retinal scans, and DNA are three other distinctive things about a human being.) Fourth, it means that new ideas and approaches for national security will be underwritten as never before. Finally, it means that a whole host of new technologies -- like nanotech -- will get more funding from the federal government.

The flip side of the market created by the Age of Fear is escapism. The transition from a television culture to a more escapist Internet and interactive-gaming culture, which is already under way in the younger demographic, will accelerate. Fear requires respite, something that relieves anxiety. As New Yorkers (especially) and Americans (generally) learned from September 11, the television can drive you mad.

You have to get out of your own head, your own thoughts, and connect. New Yorkers did (and still do) this by going out to restaurants, but young people can't afford to go out every night. Yet their need to connect is made even greater by the Fear. And so games and Internet connections will prosper and thrive as never before. And the games that sell best will be the kind that resonate within the new zeitgeist.

National politics will be redefined by the Fear. For the past 10 years, cultural and economic issues have crowded out national-security concerns. Now national-security concerns crowd out everything else. The conservative coalition cobbled together by Nixon and expanded by Reagan diminished with the end of the Cold War. Since the 1988 election, Republican presidential candidates have received 37% (1992) , 42% (1996) , and 48% (2000) of the national vote. But the national-security politics of the so-called red-zone states are now the national-security politics of the entire country. Conservatives and Republicans will ascend. Liberals and Democrats will be on the defensive.

Governance will adjust accordingly. President George W. Bush will have unprecedented latitude to organize a national response. Congress must not appear to be obstructionist or in any way detrimental to the nation's security. Any congressman or senator so perceived will be punished at the polls, no matter how congenial his or her district or state might be.

Bush himself will have to pay mind to what political economist Walter Russell Mead calls the "Jacksonian" constituency. Jacksonians are the political descendants of Andrew Jackson, who fought the Indian wars with a ruthlessness that bordered on the maniacal. Jacksonians are the core of Bush's base, and they will demand a shattering response to the World Trade Center and Pentagon attacks. If he does not perform to their liking, they will find someone else who will.

No one can say with certainty what the full scope of this sea change in the national psyche portends. But it is a huge change, an inflection point like no other we have known. The Nazis were across the ocean. The Japanese only got as far as Hawaii. The Soviets were deterred by MAD (mutual assured destruction) . Since September 11, there has been a distinct possibility that the lives of hundreds of thousands of major metropolitan residents could end with a sudden intake of breath or the blinding flash of a loose nuke. That terrorists would not use such weapons is now wishful thinking. We are at war with people who are capable of horror beyond hell.

And everyone knows it, in the most profound way. September 11 begat the Fear. The war to come will beget more fear. It is an absolutely necessary war, and anything less than victory is unacceptable. But it will not take place "over there" in some sequestered place away from where we all live and where something called "the economy" operates. The war (or at least part of it) will take place on our soil, and it will be the locomotive of economic activity, pulling everything along with it.

The good news is, the recession will be muted by the expenditures of vast sums of federal dollars. Guns and butter and technology will lead to a kind of boon. But riding shotgun down this avalanche of money will be the sadness that fear bequeaths. Happy days will not be here again for a long, long time. The world changed forever on September 11. And Americans now know what the Irish have known forever: The world eventually breaks your heart.

John Ellis (jellis@fastcompany.com) is a writer and consultant based in New York.

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