First of two articles
Trucker Bill Frizzell revved his 65-foot rig through another industrial strip, past the shiny silos of Dow Chemical Co. and a drab procession of drive-through food options. There's little downtime to his trips now, scarce chance to eat bacon and eggs and play video games at the Flying J truck stop in Walton, Ky., or worship at the Transport for Christ ministry near Gary, Ind.
But he's not complaining. Frizzell has more highway to cover than ever, more cargo to haul and headier aspirations for Miracle Transport, the trucking firm he runs out of his basement. His workdays and work nights have gone from grind to sprint, his once-uninterrupted drives now fragmented by newfound pickups and drop-offs. Frizzell's pace and his business have been recalibrated to the souped-up speeds, demands and possibilities of what's come to be known as the New Economy.
Like many U.S. businesses today, Miracle Transport is using the Internet to wring fresh revenue from its equipment and workers. In May, the company joined an online network, National Transportation Exchange Inc., which helps drivers and dispatchers find cargo in range of their trucks. NTE fills the empty rig space that can turn driver time unproductive, and the Downers Grove, Ill., start-up will help generate an estimated $75 million in sales this year for the trucking industry.
Frizzell is hardly the archetypal high-flier for these boom times. He has a bearded, sober bearing, wears scuffed brown cowboy boots and listens to Merle Haggard CDs as he drives. He cares more about giving 10 percent of his income to Midland's Christian Celebration Center than buying a Gulfstream jet. He has never been to Silicon Valley except once, to pick up a big computer when he drove for United Van Lines.
But Frizzell is just as much a participant in the changes sweeping the U.S. economy as any bull market zillionaire or geek tycoon. And the transformation of Miracle Transport is perhaps just what Alan Greenspan meant when the ever-cautious Federal Reserve chairman gave a kind of papal blessing to the innovations he sees pervading the country. "An impressive proliferation of new technologies," he told a congressional panel last summer, "is inducing major shifts in the underlying structure of the American economy."
Speed and Information
The "New Economy" has become a rubric that seems to encompass every development of the late-century boom--from telecommuting to casual Fridays to the latest mega-stock offering. But at the heart of a broad notion is a simple idea: Thanks to a wave of computing advances, American businesses can do far more than they ever could before, and they can do it faster and cheaper.
In real terms, this means that airlines can save about $7 a ticket by processing a ticket online instead of on paper; that Navistar International Corp. can now produce 300,000 diesel engines a year with 1,800 workers, compared with 100,000 engines with 1,200 workers in 1994; that new software helps the Weather Channel answer 250 e-mail messages a day instead of 80; and that Detroit now takes less than 48 months to produce a new-model car, compared with 60 to 70 months five years ago.
For Frizzell, it meant logging on to NTE before a recent run from Pigeon, Mich., to Chicago Heights, Ill., and finding extra cargo for one of his truckers to haul along the way. This led to pickups in River View, Mich.; Greenville, Ohio; Richmond, Ind.; and Plymouth, Ind. He also discovered several "backhauls"--loads for his trucker's return trip--which made for seven additional stops.
The added cargo meant the trip earned $1,925 for Miracle Transport instead of $1,125. In the last six months, Frizzell said, NTE has spurred about $60,000 in extra revenue--half the company's overall business. "I thank the Lord first and I thank NTE second," said Frizzell, who at age 41 has driven trucks half his life.
The collective gauge of these technological advances is an economic statistic called productivity, the key indicator of how efficiently the nation's labor force is working. The Labor Department recently reported that business productivity shot up at the unusually high annual rate of 4.2 percent in the third quarter, the latest in a run of momentous signals over the past four years. A recent report by Macroeconomic Advisers, a St. Louis forecasting firm, said improvements in technology have raised the productivity level so sharply that the nation's economy should be able to grow 3 percent a year in the next decade without adding to inflation.
Economists have debated the true measure and meaning of productivity rates for years. Robert J. Gordon of Northwestern University argues that recent productivity gains have occurred disproportionately in the high-tech sector. Others have downplayed the significance of technology, maintaining that cheap imports, liberalized trade and low interest rates have played a greater role in helping companies cut costs by making them more efficient.
But beyond these expert debates, the New Economy is driven by a powerful ethos, a conviction that new technology can eliminate traditional drains on efficiency--the time, for instance, that truckers spend working the phones at truck stops in search of loads. It is a crusade for streamlining rooted in the principle of "uptime," originally a computer term from the 1950s to define when the room-size machines could function.
"Uptime" now extends to humans and entire organizations, meaning a working rhythm with minimal lags--and all the savings that can bring. Phone equipment maker Nortel Networks Corp. said it saves $2.4 million a year by managing all of its real estate properties from a single desktop in Virginia, instead of having 20 people crisscrossing the country at any given time. Dow Chemical can process its quarterly financial results in 16 fewer days by consolidating its company information on sophisticated "data warehouse" software.
It used to require a phone call to track a FedEx parcel, and a wait for the customer service agent; now, more customers visit the FedEx Web site than call its 800 number. And FedEx's customer service reps can spend their increased uptime on pursuits more constructive than simply finding information that many customers can get with a point and click.
"Instantaneous execution has become the era's defining business promise," said Keri Pearlson, an assistant professor of information systems at the University of Texas's graduate school of business. And that has been made possible by a confluence of innovations--in microprocessor, software, laser, fiber-optic and satellite technologies--that have sped the flow of information to a radical degree, and reduced its cost dramatically.
Data at the Fingertips
At a Louisiana-Pacific Corp. wood products mill in Houlton, Maine, for instance, the plant's uptime rate (95 percent) is updated and flashed constantly for the plant's 116 plant employees to see. So is the most seemingly arcane data, about menaces such as "flaker starts," an electrical blip that can cause a few seconds of downtime on the production line. The numbers are available to all on a company Intranet.
Such data, however minute, are a defining currency in the contemporary organization. Once tightly controlled, the flow of information has been democratized by networking and database technologies, with profound implications both for the way a company is run and for its potential to be more efficient.
In "Old Economy" organizations, information typically remained at management level. "Today, with information filtering everywhere, it would be dysfunctional to use the old model of a single decision maker," said Erik Brynjolfsson, a productivity expert at MIT's Sloan School of Management.
Brynjolfsson, who has studied data from 600 large U.S. firms, said the computerized dissemination of information has had a leveling effect on organizations. It has led many to break down hierarchies and institute more team-oriented structures.
"We put out the information to everyone as fast as we can," said Jerry Nason, Louisiana-Pacific's plant manager in Houlton. "Who knows more about uptime than the people who do the work?"
Savings From Technology
To many economists, increased uptime provides an explanation for the most surprising facet of the U.S. economy this decade--for the first time in memory, the nation is experiencing low unemployment and low inflation simultaneously.
When unemployment is down, businesses traditionally compete for workers by offering higher wages. This cost is often passed on to consumers, resulting in inflation. Yet the pattern has shifted in the 1990s, and a prevailing theory is that once-unforeseen efficiencies have helped companies cut costs and keep prices low--a necessity in today's intensely competitive economy.
"We're seeing only the tip of the iceberg in terms of technology-enabled savings and efficiencies," said John Chambers, the chief executive of Cisco Systems Inc., the Silicon Valley computer network company that's building much of the Internet's hardware infrastructure.
Chambers, whose company is reaping staggering profits and stock valuations from the online boom, posits Cisco as an object lesson for conducting business electronically. The Internet has accounted for a 20 percent increase in the firm's productivity rate, he said, and saves $500 million a year in operating costs. One small piece of this occurs every time Cisco hires a new employee. Since much of Cisco's recruiting and application process takes place online, its "cost per hire" is $6,381 compared with the high-tech industry average of $10,800, the company said.
Chambers works in a crammed and modest cubby at Cisco's headquarters in San Jose. Cisco Executive Vice President Don Listwin sits in an adjoining office and monitors that day's sales flow from his "Executive Dashboard." Listwin can study every aspect of Cisco's business: How many people did Cisco hire that day in Asia? How many network routers did it sell in South America? "The essence of the New Economy company is using technology to optimize your information," Listwin said.
Old Practices Abandoned
Windfalls are being reaped across numerous sectors, new and entrenched, in every region of the country. Ford Motor Co., the auto icon that perfected the assembly line early in the century, is saving tens of millions of dollars a year by simulating many of the cumbersome and costly car design processes on powerful supercomputers.
The company has reduced the number of clay automobile models by 80 percent to 90 percent, said Charles Schloff, a 34-year-old Ford product manager at the company's Dearborn, Mich., headquarters. Instead of technicians having to use heavy tools to tinker with a clay automobile, they can tap a few buttons on a keyboard for the same simulated effect. It saves huge amounts of time, along with the $250,000 to $500,000 it costs to build each clay model.
Similar efficiencies have struck Big Oil, like the auto industry a pillar of the traditional economy based on manufacturing and natural resources. When he started work at Texaco Inc. 22 years ago, geologist Ronald Cupich would spend months studying paper prints of seismic data in the part of the world he was exploring. "We would be moving up and down, folding big sheets of paper the size of horse blankets," Cupich said. "This was tedious, inefficient time."
What once took months now takes hours. Cupich sits in a Houston office park, in an elaborate 3-D simulation center where Texaco geologists are homing in on potential drill sites off the coast of West Africa. It costs about $50 million to drill an oil hole and most of these turn out empty, but the hit rate has risen considerably since the center was built--for about $3 million.
The Silicon Graphics Onyx2 Infinite Reality supercomputer allows Cupich and his team to turn the undersea terrain over like fluorescent clay on a 25-by-8-foot screen. By bright color coding, he can sift for sand, shale and faults that could be fatal to a dig. He says he spends about 98 percent of his time in front of a computer now, compared with about 30 percent five years ago.
"Technology is getting up to the speed of how the brain works," said Jesse Mericle, Texaco's vice president of West Africa exploration. "Or maybe it's the other way around."
Rise of Entrepreneurs
As the price of computing power has dropped and chip speed has accelerated, the barriers to being a technical innovator, or an industrial pioneer, have been lowered appreciably. A would-be entrepreneur doesn't need much to start, say, an Internet business. No inventory, no store, no physical proximity to customers and not a lot of money. Ambitions have soared accordingly.
Gene Riechers, a venture capitalist who invests in start-up technology firms for Arlington brokerage Friedman, Billings, Ramsey Group Inc., said he gets 150 business plans a month from would-be entrepreneurs, double the number of two years ago. "There is room for literally millions of people to redefine lives," said Riechers, to make them more convenient and productive. That's the promise of so much new technology, he said.
And it's spawned the New Economy's most celebrated figure, the Internet entrepreneur.
Five years ago, Matthew Pittinsky graduated from college and came to Washington with an education career in mind. He took a job as a student teacher in a District junior high school. Then the Internet triggered bigger ambitions.
In June 1997, Pittinsky co-founded Blackboard Inc., a Web-based service that allows colleges to put their course material online. Today, it is used by more than 1,600 universities and public school districts in 70 countries. A college dropout in Tanzania might soon attend a virtual Harvard. Pipe dream or no, Pittinsky said he has a rejiggered sense of what is possible. Why try to scale a corporate ladder when you can make a new industry from a desktop?
And another thing: In the next year, Blackboard will likely hold an initial public offering, and Pittinsky stands to become a paper multimillionaire at the age of 28.
Longer, Harder Hours?
In time, the expectation of instantaneous information will become "hard-wired" into organizational expectations, said Gopi Bala, the director of management strategy at Yankee Group, a Boston technology consultancy. "It will create a new economic ecosystem."
Bala compares today's U.S. economy to contemporary athletes. They are bigger, stronger and faster than their forebears, and it's no fluke of evolution. Rather, the athletes have benefited from nutritional breakthroughs, new training tools and techniques, even economic incentives and information that, presumably, expanded the population of available talent. By the same measure, today's economy has been nourished to better fitness by technology.
Fitness is an appropriate metaphor, as the New Economy has bred a runaway workweek unmatched in the industrialized world. U.S. workers are toiling the equivalent of two additional 40-hour weeks a year, compared with Japanese workers, according a new study by the International Labor Organization, a United Nations agency. They worked nearly 2,000 hours per capita in 1997, an increase of 4 percent from 1980.
"When I was a kid reading Popular Science in the Sixties, everyone said the appliances of the future would let us work 25-hour weeks," Riechers said. "That nirvana certainly never materialized."
This is in part due to basic supply and demand: With a 4.1 percent unemployment rate, and countless jobs going unfilled, there is simply more work being done by fewer people. Nineteen percent of Americans say they are working more than 49 hours a week, according to a Bureau of Labor Statistics report, up from 16 percent in 1985.
But it also gets to a crux of a New Economy debate: the question of whether workers are producing more because they have better tools, or because they're simply working more hours.
What's clear is that human stamina is often the only barrier to total uptime in "our interconnected, hyperactive, e-mail-fueled, sleep-deprived economy," said corporate consultant and historian Daniel Yergin, the chairman of Cambridge Energy Research Associates. Bodily rest, so unproductive, is often a casualty in the sleepless business cycle. Yergin half-jokes that "the next frontier is biotechnology. People are going to need genetic therapy to keep up with the demands of the New Economy."
Back on the Road
But in its most hopeful manifestation, the New Economy is about what can be done and what can be dreamed. Miracle Transport began as a one-truck operation last November. Frizzell added two more trucks after he joined NTE six months ago. He envisions a small empire of 150 trucks. "I want to be your man to call for one-stop shipping around Midland," said Frizzell.
Sitting in his Midland home office one morning this month, he signed onto America Online, jumped to National Transportation Exchange and contemplated an electronic menu of loads: perhaps a run from Muskegon Heights, Mich., to Carterville, Ga., another from Prairie du Chien, Wis., to Centralia, Ill.
As he browsed, Rick Armstrong, Frizzell's church pal and a Miracle driver, walked in. Armstrong was in the midst of a long haul of cement products that began in Baltimore and would end in Wyoming, Mich., 2 1/4 hours from here.
It was 11 a.m. and he'd been driving since 2:30 a.m. He sat down and joined Frizzell in gulping some coffee before they both rolled out again.
Staff researcher Richard Drezen contributed to this report.
Next: Workplace strains at Amazon.com
CAPTION: Technology's Push (This graphic was not available)
CAPTION: Picking Up More Business (This graphic was not available)
CAPTION: Geologists are using a 3-D simulation center at Texaco, above, to find potential drilling sites off the coast of West Africa, saving millions of dollars for the company with their more accurate predictions. Right, geologists in the early 1950s and more recently labored over drafting tables.
CAPTION: Trucking entrepreneur Bill Frizzell of Midland, Mich., locates extra transport work using the Internet in his home office for his new business, Miracle Transport.