Morningstar Magazine - June/July 2018 - 16

Dispatches

Invest in HAL?
The difference
between "gee whiz"
and a great stock.

movies they did together, and audiences loved
every one.

This year marks the 50th anniversary of the
spectacular science fiction movie "2001: A Space
Odyssey." The Hollywood spectacular was
produced and directed by Stanley Kubrick and
written by Kubrick and Arthur C. Clarke,
one of the top science fiction authors of all time.
Clarke not only wrote well, but he wrote a
lot; beginning in 1937 and continuing as long as he
lived, he wrote 22 novels, plus 13 volumes of
short stories.

The movie was an adaptation of the successful
Broadway play "The Desk Set" performed
in 1955-56. The star of the play was Shirley Booth,
a popular stage, screen, and TV actress. (Her
most famous role was on TV in the 1960s, playing
the title character in the long-running sitcom
"Hazel.") The plot of the movie script, following the
play closely, is centered on the heroine's
job as the head research librarian for a broadcast
network, doing fact-checking. The company
is going through the early stages of computerization. Spencer Tracy is the computer
installer. Payroll has already been computerized,
and now he is installing a second machine
in the research library. The four women who staff
the research library fear for their jobs. The
computer is able to process English language input
and answer questions on any subject. It
seemed awesome in the movie, as it should
have, for its hardware and software was
46 years ahead of its time. The playwright had
imagined Wikipedia!

Surprisingly, most critics panned the movie
when it was released. The most famous film critic
of the time, Pauline Kael, called it "trash
masquerading as art." The original version of the
film was repetitious. Kubrick cut 20 minutes,
and the revised film went on to be the highest
grossing film of 1968. It is generally ranked
in the 10 best movies ever made. Technological
marvels predicted in the film included the iPad and
artificial intelligence embodied in a computer
named HAL. Space exploration was the topical
theme of the movie-for the first humans
landed on the moon in 1969. I think that if Kubrick
and Clarke were still alive, they would be
surprised at how space exploration has fizzled
out since Apollo.

In 1957, the most popular computer was the
IBM 650, featuring a drum-based memory, vacuum
tube circuitry, and some tape drives for inputoutput. I watched "The Desk Set" on Netflix a few
weeks ago. The picture was special for me,
because in 1960, I was trying to install the Univac
version of the IBM 650 in the Lane Bryant
mail-order warehouse in Indianapolis, and it was
a big struggle just to get the computer to
print a picking ticket. The machine was very slow
because the program resided on the cylindrical
drum. You had to wait for the drum to rotate
around until the next instruction lined up with the
read-write head. After a few months I went
back home to Chicago and joined an investment
management company.

HAL was a star, but "2001: A Space Odyssey"
was not the first movie about computers.
One of the first interesting movies to have a
computer as an important character was made
in 1957. That film was "Desk Set," a
romantic comedy starring Katharine Hepburn
and Spencer Tracy, the most successful
actor pair ever. This was their eighth of nine

You can spend an enjoyable evening watching
"Desk Set." First and foremost, Hepburn and
Tracy are a magnificent acting team, and it is still
a pleasure to watch them even in a formulaic
rom-com. (You need to believe. The polymath
heroine should be about 30, while Hepburn had
just turned 50. It doesn't matter.) Second,
empathizing with the human problems in an office

THE OLD SQUIRREL

Ralph Wanger

Morningstar June/July 2018

being computerized is not much different from
today. Third, to see how computers, and movies
about computers, improved in the 10 years
between "Desk Set" and "2001: A Space Odyssey."
Fourth, to see what office life was like back
in the 1950s. To begin with, there was no person
of color anywhere in the movie. Second, each
department conformed to strict gender roles, with
the librarians all female and legal all male.
The executives were all male, of course. On the
other hand, everyone dressed beautifully,
men in suits with ties, and women in attractive
dresses. Everyone smoked. There was plenty
of drinking, and the office Christmas party was
part of the plot. Richard the computer geek:
"What is company policy here on Christmas
parties?" Peg, a librarian: "Anything goes, as long
as you don't lock the doors."
The movie was directed by Walter Lang, one
of the top names in Hollywood back in the day. The
movie was adapted from the play by Henry
and Phoebe Ephron. The Ephrons were successful
writers, and they had four daughters who
were all successful writers, especially Nora. The
movie generally followed the plot and dialogue
of the play, although the ending was flipped. In the
play, the heroine decides to marry one of
the young vice presidents, while in the movie she
marries Spencer Tracy, the older computer geek.
What do these movies tell us about how to invest
in technology? There is a difference between
"gee whiz" and a great stock. If you had seen "2001:
A Space Odyssey" and asked your broker at
Hayden Stone what were the best computer stocks
to buy, he might well have picked Control
Data for supercomputers, Digital Equipment for
industrial minicomputers, and IBM IBM for
business computers. You put these three leading
stocks in your portfolio for 20 years. In 1988,
what did you have? A mixed bag. IBM was the best
of the three. Over those 20 years, IBM had price
appreciation of about 6.4% per year, while
the S&P returned about 5.1% annually. But Control
Data and Digital Equipment were sick companies,
soon to go out of business. One winner, two
losers. In other words, high-tech is high-risk. K
Ralph Wanger, CFA, ran Columbia Acorn Funds from 1970
to 2003.

Table of Contents for the Digital Edition of Morningstar Magazine - June/July 2018