Television in the 1920s: Technology and Financial Bubbles Are Joined at the Hip

Television in the 1920s? How come there are no stories about millions of Americans watching Herbert Hoover's inauguration? In these times of technological bubble-blowing by both innocent fanatics and not-so-innocent snake oil salesmen, it is worthwhile dipping into our musty history books. “A new technology comes on the scene and, boom, prices drop to the floor, immediately.” This statement is representative of a naïve view of how technological change happens. But when you read a little bit about the past, you come to realize that this is not how the world works.

Read up on the history of television. John Kenneth Galbraith mentions prospectuses of companies floated on the NYSE in the late 1920s that claimed every home in America would have a TV set by that fall:

Inevitably promoters organized some new companies merely to capitalize on the public interest in industries with a new and wide horizon and provide securities to sell. Radio and aviation stocks were believed to have a particularly satisfactory prospect, and companies were formed which never had more than a prospect. In September 1929 [the crash, you may recall, was in October], an advertisement in the Times called attention to the impending arrival of television and said with considerable prescience that the ‘commercial possibilities of this new art defy imagination.’ The ad opined, somewhat less presciently, that sets would be in use in homes that fall. (p. 46)

Stock prices in 1929 reached ridiculous heights, beyond any reasonable valuation. One of the justifications for the mad prices was that the innovative power of technology and American know-how was driving ever greater efficiencies that justified absurd stock prices without any relation to earnings, which were in some cases non-existent (as was the case during the late nineties Internet boom). Sound familiar?

I am not 40 years old yet and I’ve already seen this story play out twice: first, with the Internet bubble of the 1990s and, later, during the housing bubble of the 2000s. And now I’m seeing the same inane dynamic in translation, a frenzy fed in part by the much larger social media phenomenon.

Of course, TV sets eventually made it into every American home… in the 1960s. But we all know what happened in the interim: stocks cratered, millions lost their job, a decade of depression ensued and a second world war broke out. Instead of watching TV in their homes in 1932, Americans were lining up on bread lines, and in 1942 they still lacked TV but their children were losing their lives in tiny Pacific islands no one had ever heard of. Yes, stocks recovered and eventually regained their 1929 values… in 1954. Adjusted for inflation (i.e., in real terms), they only beat their 1929 levels a couple of years before Neil Armstrong set foot on the Moon.




Miguel Llorens is a freelance financial translator based in Madrid who works from Spanish into English. He is specialized in equity research, economics, accounting, and investment strategy. He has worked as a translator for Goldman Sachs, the US Government's Open Source Center and H.B.O. International, as well as many small-and-medium-sized brokerages and asset management companies operating in Spain. To contact him, visit his website and write to the address listed there. Feel free to join his LinkedIn network or to follow him on Twitter.