Clever Geek Handbook
2 November 2025

Shock of Gray

Recommendation

If age is just a number, then that number is about to present enormous global consequences in the next few decades. So says veteran journalist Ted C. Fishman in his around-the-world study of how an aging planetary population will affect all aspects of society, including business, government and family life. Fishman’s in-depth study leans heavily on stories, anecdotes and conversations, backed by extensive statistics and impressive academic research. His tales are as entertaining as they are illuminating, pointing out the contradictions, foibles and hard realities of life lived on a graying globe. BooksInShort highly recommends Fishman’s all-encompassing look at old age – not just to older people or the middle-aged, but also to members of younger demographics, who are about to embark on an unprecedented journey with their elders into the future.

Take-Aways

  • The world’s people are aging: Globally, the average human life span is now 64 years; in 1900 it was 30.
  • Improved medical care means that more seniors will live longer in the future.
  • Declining birthrates will make seniors a greater percentage of the population. In the long run, fewer children will need to support more family members.
  • Businesses will have to “turn silver into gold” by catering to markets of older people.
  • Young, low-paid, mobile workers from developing countries will increasingly move more fluidly around the globe to serve older nations.
  • Literacy, urbanization, infant care and – most importantly, being born in modern times – accounts for growing longevity.
  • For a view of a gray America, consider Florida, which has the US’s oldest population.
  • By 2050, Japan will have lost 41 million in population and one-third of its labor force.
  • In this century, hundreds of millions of people will age without family or friends to care for them, shifting an unimaginable burden onto governments.
  • If you live into your 90s, you’re closer to the end, but “impressively resistant to disease.”

Summary

The Silver Lining

The estimated life span of a person in ancient Rome was 25; by 1900, that number had advanced only to 30 years old in most of the world. Today, average longevity globally has reached 64. The world’s population is undoubtedly getting older. Medical advances that extend life spans portend relatively greater numbers of oldsters in upcoming decades. Meanwhile, declining birthrates guarantee that elders will be a larger percentage of the population. In the US, the number of people aged 75 to 85 will almost double by 2050, by which time the country will have 2.5 million centenarians. Senior citizens will make up 40% of Japan’s population by 2050. Europe’s elder populace will grow faster than any other age cohort. Even developing nations are aging, with the proportion of children dropping and the proportion of over-60s rising. The impact a graying planet will have on future businesses and lifestyles is already in sight.

“The world is going gray. Getting not just older but old.”

Some companies are learning “how to turn silver into gold” for profits. For example, Lifeline, a US company, provides monitoring services for elderly clients. Reacting around the clock to electronic signals from necklace or wrist devices, trained operators serve more than six million users by answering inquiries and sending help; they can respond to almost 700,000 calls within a few hours. The security of having an automated signal for help allows seniors to continue living on their own, even far from their relatives. Services like Lifeline play into society’s fear of aging and into seniors’ desire to remain independent and capable – even beyond their abilities. In 2006, the Dutch conglomerate Philips acquired Lifeline for $750 million in a “big bet on health care services for the growing population of the elderly,” an expanding $140 billion industry.

“The well-being of the globe’s young is also at stake, because it is they who need resources also required by the old...in the end, it is largely the young, who, as family members, friends and citizens...will eventually care for the old.”

But some businesses have to adjust downward to accommodate changing demographics. Harley-Davidson motorcycles, once the totem of defiant youth, increasingly are a “rite of passage” for older riders seeking to relive their rebellious pasts. Faced with an aging clientele, Harley is seeking ways to recapture young riders, who consider its iconic bikes fit only “for old fogies.”

“The world is changing as a result of mankind’s greatest gift to itself, the engineering of longer lives.”

Increasingly, companies are designing new products and approaches to meet the needs of an aging society. A Japanese company has invented a robotic plush baby seal that emits soothing sounds; it helps calm dementia patients in nursing homes. A German community recruits former prostitutes to provide elder care in nursing homes because the women “possess good people skills, aren’t easily disgusted and have zero fear of physical contact.”

A Gray Planet

As its population ages, Poland suffers from a lack of able-bodied construction workers. Its robust, young workers have emigrated for higher-paying jobs. Young Filipino nurses train and work in the US, undercutting the labor force at home. China’s youth work for foreign manufacturers, but time’s inexorable passage means that China, The Philippines and other now-young countries also will face labor shortages one day as their people age and birthrates fall. Eventually, fewer young people will work to support more older folks. “From womb to tomb,” certain patterns emerge:

  • “Global aging is the result of mankind’s greatest triumphs” – Brilliant advances in medical care and technology allow humans to live longer.
  • “Success [requires reconsidering] how to maintain every benefit” – How can society afford to maintain the aged in their accustomed comfort throughout their lives?
  • “The spheres of active, healthy, engaged older adults will grow” – From working to volunteering to pursuing varied interests, more elderly people will stay busy and active.
  • “An aging world is an increasingly dependent world” – More elderly people will need care; additional young or middle-aged people will need to care for them.
  • “Global aging dramatically transforms the relationships between men and women” – Women live longer than men and will increasingly become their husbands’ caretakers.
  • “Age discrimination pays” – Despite their numbers, elders will remain vulnerable to ageism. The world remains “ingenious at figuring out ways to marginalize and exploit older people.”
  • “The aging world moves people around the globe” – Nations with young, low-paid mobile workers will increasingly serve older nations. People as well as goods and services will transit more fluidly around the globe.
  • “Young people today will live in a far older world tomorrow” – Fewer children will have to support more family members.

Long in the Tooth

Discussions around aging are a modern phenomenon. Throughout history, death came early and quickly: Illnesses and plagues, high infant mortality and unhygienic living conspired to cut down relatively young people. In 16th-century London, 20% of children did not survive their first year, and another 20% died before age five. The greatest assurance of a long life is simply to be alive when you are, to have been born in the modern era, after “the turn of the 20th century...Nothing else even comes close.” Contemporary people live longer than those in the past for many reasons:

  • Literacy and education – The ability to read and act on health information matters, whether it’s food and drug labels or mass media and the Internet. For every extra year a girl spends in school, the infant mortality rate of her children will drop by almost 10%.
  • Urbanization – Living in the crowded, filthy cities of the past once wiped out thousands from disease. Modern cities are the best places to live longer lives. Cities provide access to better services and information. People younger than 25 live longer in cities than in rural areas, according to global mortality rates. New York City residents’ longevity rates soared by five months in 2004, beating the national average by three months.
  • Prenatal and child care – Infant mortality rates in the most destitute nations now are far less than they were in the wealthiest nations centuries ago. And in the US, better child survival rates account for most of the 20th century’s increase in life spans, adding 33 years to most Americans’ lives.
“The numbers are pretty shocking. Fewer kids, more old people – nearly everywhere in the world.”

Regardless of where you live, you will age the same way everyone does. Aging occurs at the molecular level, when antioxidants or the extra oxygen molecules from nutrition and the environment, corrode and kill human cells. Smoking, sweet and rich foods, radiation, pollution and minor illnesses all add antioxidants to the body. Aging begins when you’re born, but its effects become more apparent from your 30s onward, as your muscles and tendons weaken, your metabolism slows, your brain begins to decline, and you become susceptible to cancer and diabetes. In your 40s, eye diseases such as cataracts, glaucoma and macular degeneration begin; fatigue sets in; joints weaken and ache with arthritis; you lose height; your hair starts to turn gray; and you get cellulite and baggy eyes.

“In just about every measure of cognition, people’s abilities begin to decline ever more steeply beginning around age 50...but the best prediction for the powers of any one person at 80 was that person’s abilities at 50.”

Your 50s are prime time for high blood pressure, sugar and cholesterol; weight gain; broken bones; gum disease and decaying teeth; and memory loss. By your 60s, heart disease and cancer are your biggest risks; your hearing falters, the fat under your skin diminishes, making your ears and nose more prominent; you lose ease of mobility and are prone to falls. And in your 70s and 80s, the incidence of Alzheimer’s disease and dementia soars. If you make it to your 90s and to age 100, you’re closer to the end, but “impressively resistant to disease.”

“God’s Waiting Room”

If you want to see what a gray America might look like, check out Florida: It boasts “the oldest population of the 50 states,” with more than 3.3 million people older than 65, plus another almost one million senior winter residents. Aside from the abundant sunlight that promises rejuvenation, Florida entices retirees with good social services, “continuing care retirement communities,” fine arts programs and extensive medical facilities for the aged. Florida’s young people, however, get shortchanged: Spending for childhood education is among the lowest of all the states. And the recession has suppressed the already low pay for workers serving the older population, with better-qualified people accepting minimum-wage jobs. Active seniors crowd out their younger competition for low-paying jobs. Nonetheless, Florida residents are tolerant of slow-moving elderly in the shops and streets, and they are careful with older drivers on the road.

“The complexities of global aging strain human comprehension.”

The picture of active seniors on golf courses and in pottery classes belies the reality that the elderly are getting much older; nonagenarians and centenarians are much more prevalent. But partly because of Florida’s good weather and focus on outdoor activities and socializing, being “85 here is not the same as in an aging town in the Midwest. The 85-year-olds here look 65.” As they grow frailer, pensioners will have to spend heavily on private home care and nursing homes; those who can’t afford such necessities will have to rely on already-strained state and federal aid.

Aging Around the World

Women in Spain have the highest life expectancy of any group in the EU: 84.4 years. The country is rapidly aging, and its birthrate is among the world’s lowest. Immigrants from Africa and the Middle East arrive in large numbers to fill the jobs fewer Spaniards want. One-third of Madrid’s population is foreigners. Popular opinion credits the Mediterranean diet of fish, olive oil and fresh vegetables (plus wine) for widespread longevity, but the socializing impact of meals taken with friends and family also plays an important part.

“The American writer Kathleen Thompson Norris once observed that ‘in spite of the high cost of living, it’s still popular.’ And in an aging world, it’s more popular than ever.”

As one of the world’s largest cities, Tokyo has more old people than any other city. Japan’s population began to decline in 2005; by 2050, it will have gone down 41 million, one-third of its labor force. Japan will host one million centenarians in 2050, up dramatically from slightly more than 32,000 in 2007. The country is shrinking demographically. Given that decline its population will be proportionately smaller in 2050 than the rest of the world, where population will more than triple. Traditional values are changing; more Japanese women work, thus putting off marriage and childbearing. The elderly no longer are assured that their children will care for them at home, since families are more likely to live apart. Yet the burden of elder care continues to fall on women, who care successively for children, parents and other relatives. Older men feel the changes more acutely: Nicknamed “big junk” and “soggy leaves on the ground” for their perceived ineffectiveness, Japanese men’s suicide rate is the highest in the developed world. Many Japanese firms will rehire retired employees – at reduced wages – to benefit from their expertise, thus reducing opportunities for younger workers and raising the question of how an increasingly older workforce can compete globally.

Adapting to the Aging

Rockford, Illinois, near Chicago, is emblematic of the industrial and manufacturing decline of the American Midwest. Once one of the wealthiest towns in the US, the former “Screw Capital” is economically depressed. Fewer job opportunities compel older workers to collect Social Security earlier than they would have if they’d remained employed; they can approach their former earnings only by cobbling together several part-time, low-paying jobs. Despite older Americans’ stated desire to work beyond retirement age, they may well find too few available jobs or they may be forced to compete with younger workers for less-lucrative, entry-level employment. One bright spot in Rockford’s economic picture: Former employers are rehiring engineers and skilled production workers as consultants to advise the manufacturing companies in China that have taken on their previous jobs.

“Time on earth is the ultimate scarce resource and one prize that, so far, money cannot buy enough of.”

In this century, many millions of people will have no “familial resources” and will age without relatives or friends to care for them, shifting an unimaginable burden onto governments. Changes to business practices also are on the horizon: How much liability will banks and financial firms incur in dealing with older investors, who can rightly claim frailty and senility when suing for investment losses? Entertainment media will chase the once-ignored older-than-50 cohort, which watches more television and spends more money than young people. The stereotypes about old people – they’re slow, not as capable, demanding – die hard, but the greater their presence in society, the more people will have to overcome their ageist biases and confront their own fears of aging. They need only look to the example of Ida Ruth Hayes Greene, who in 2010 got her high school diploma on the eve of her 99th birthday. Comedian Jay Leno tartly commented on Greene’s achievement: “On the advice of her guidance counselor, she will attend a two-year college.”

About the Author

Ted C. Fishman writes for The New York Times, The New York Times Magazine, The Wall Street Journal, National Geographic, The Sunday Times, Harpers, USA Today, GEO and other prominent publications. He is also a frequent keynote speaker.

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Shock of Gray

Book Shock of Gray

The aging of the world's population and how it pits young against old, child against parent, worker against boss, company against rival, and nation against nation

Scribner,
 


2 November 2025

The Shadow Market

Recommendation

Journalist Eric J. Weiner exposes the hidden, underreported group of countries and specialized national funds – “the shadow market” – that exerts a huge influence on global and American financial markets, and, indirectly, on US foreign policy. His interpretation of economic forces underpins his case that the US should prepare to play a diminished role in the global economy of the future. He does present a disturbing scenario: Massive public debt held by foreign entities renders the US vulnerable to economic and political manipulation. Weiner clearly believes the US’s future will be very different from its past, but his sometimes hyperbolic tone gives the book a veering-on-xenophobic cast. Nonetheless, BooksInShort considers his book an absorbing read for those interested in the new economic factors challenging America’s position in the world.

Take-Aways

  • Made up of rich nations and sovereign wealth funds (SWFs), “the shadow market” controls trillions of dollars and operates clandestinely.
  • The shadow market countries use economic power to pursue geopolitical agendas that often conflict with US interests.
  • While a main US creditor, China has financial links to the Taliban and al-Qaeda.
  • The British set up the first SWF in Kuwait in 1953; by 2008, the Kuwait Investment Authority managed $225 billion in assets.
  • America’s global influence is waning because foreign investors and governments hold most of its debt.
  • The US needs to defend itself against economic warfare and cyberattacks.
  • Shadow market participants work through unregulated hedge funds and private equity.
  • After the 2008 recession, the US launched a campaign to attract non-US investments.
  • The largest ever IPO – $22 billion for a Chinese bank – occurred in 2010, while the West dealt with the collapsing Greek economy.
  • The shadow market exemplifies the shift of geopolitical power from West to East.

Summary

What’s Really Going On

Before the 2008 recession began, the US was the world’s economic powerhouse. But as the recession took hold, decimating businesses and draining the capital markets, the US economy desperately needed more cash. In late 2008, the George W. Bush administration sent emissaries from the US Treasury to Kuwait, Saudi Arabia, China, Singapore and Abu Dhabi to request multibillion-dollar capital investments. But these countries rejected the Americans’ entreaties. Already damaged by the failures of Lehman Brothers and Bear Stearns, these nations did not want to assume more US exposure. Without these crucial funds, the US Treasury had no choice but to undertake huge bailout and stimulus programs that incurred massive debt for taxpayers.

“The march of economic history...is indifferent to your plight or mine.”

The US economy has been weakening for years due to poor fiscal policies combined with excessive consumption and mountains of public debt. Increasing globalization requires capital, which the US can no longer provide, to fund growth. A “shadow market” fills the void. It operates secretly, uses sophisticated investing strategies and, according to projections, will exceed the financial power of the entire West in the near future.

“The shadow market means that a new global economic force is at play – one that we’ll all have to contend with for decades to come.”

This shadow financial market has no command center or head office; it is made up of rich nations and investors who operate in unregulated markets and invest through hedge funds, private equity, state-owned corporations and government-run sovereign wealth funds (SWFs). “Petrodollar” states such as Saudi Arabia, Kuwait and Abu Dhabi, as well as China, Japan and South Korea, manage more than $12 trillion in assets. Estimates predict that Persian Gulf- and Asian-owned assets will spike by more than 50% in five years, dwarfing any comparable US gains.

The Shadow Knows

The shadow market developed after World War II, when Britain needed capital to rebuild itself. No longer able to support its overseas territories, Britain chose oil-rich Kuwait in 1953 as the site of the first sovereign wealth fund. Oil revenues in the fund allowed Kuwait to declare independence from the UK in 1961 and it became one of the wealthiest nations per capita on Earth. In 2003, the Kuwait Investment Authority (KIA) adopted a more aggressive strategy based on alternative investments (real estate, hedge funds, new market financing, private equity) to generate higher returns and provide start-up financing to Kuwaiti investment funds. The KIA’s success – by 2008 it held $225 billion in assets – has allowed Kuwait to finance the diversification of its economy away from oil dependence.

“As the US debt load has skyrocketed, the concept of mutually assured destruction has become the central economic metaphor for America’s financial dilemma.”

But the wealthy nations of the shadow market also use their economic power to pursue their own geopolitical agendas. For example, take China, which owns 10% of Morgan Stanley as well as holding $2 trillion worth of US currency and bonds: Chinese-made weapons have turned up in Taliban and al-Qaeda possession, pointing to China’s “financial relationships” with “enemies of the West.” Rich countries like Qatar and Dubai have complex relationships with pariah states such as Iran, and they serve as financial hubs for transferring money to terrorist groups.

“The sheer size of [US] national debt – and the fact that it’s largely held by many of our global rivals – has reduced our potential geopolitical influence, because we really are controlled by the countries that have invested in us.”

Since 2007, foreign investors and governments have held most of the US’s debt, a development that potentially constrains America’s global influence, especially when some of the lending nations are US rivals. America’s dependence on nonresident financing sources led Michael McConnell, the former director of US national intelligence, to point out in 2008 that one of the greatest threats against the US is that of “the financial capabilities of Russia, China and the OPEC countries” to impose their political aims. Some military and intelligence officials have even called for preparations for economic warfare. For example, US government simulations show that if China were just to rejigger its portfolio of Treasury bonds to shorten maturities from 90 to 60 days, it would wreak havoc in US markets.

The Mexican Mess

The “tequila crisis” of 1995 revealed the fragile and interconnected nature of the global financial system. The rapid collapse of the Mexican peso in what former secretary of the Treasury Robert Rubin termed “the first real financial crisis of the 21st century” spread investor panic throughout developing nations’ economies, threatening their stability as well as businesses and jobs in countries – like the US – that trade with the developing world. Rubin convinced President Bill Clinton to support Mexico with $20 billion in loan guarantees, while the International Monetary Fund added another $18 billion. America then had the liquidity and sway to intervene in a foreign country to safeguard its own financial interests. The efforts stabilized Mexico’s economy and provided important lessons to other countries with “aspirations for increased geopolitical influence”: that financial clout could override military capacity and that a fiscally weakened US wouldn’t be able to exercise the same authority it had wielded during the tequila crisis.

Shhh...Follow the (Secret) Money

While foreign governments may control huge amounts of capital, not all are savvy investors. As a result, they are buying that expertise by investing in established private equity investment firms and hedge funds, while also setting up their own funds in conjunction with top-name managers. The migration of leading investment talent to SWFs emerged as a major hiring trend in 2009 and is expected to continue, according to management employment specialist Heidricks & Struggles.

“In many ways, we’re now living in the global, free-market capitalist society our bankers and financiers always dreamed of.”

Shadow market operators take particular interest in private equity firms and hedge funds: These firms negotiate their investments in confidence, using borrowed money to engage in activities ranging from venture capital to leveraged buyouts. In 2009, China’s chief SWF, the China Investment Corporation, invested $500 million in a fund operated by the Blackstone Group.

“For all the financial frustrations surrounding the rise of economic power of wealthy oil states in the Persian Gulf, it’s the geopolitical implications that are truly frightening.”

While these investments differ, their common denominator is secrecy. Neither hedge funds nor private equity firms have to disclose their activities. They are exempt from the US Securities and Exchange Commission’s oversight through their use of SEC Rule 144A, which permits “qualified institutional” investors (those with more than $100 million in market holdings) to transact among themselves without registration and with few legal requirements. This privacy is one reason Rule 144A transactions have raised more money each year since 2006 than funds raised in initial public offerings (IPOs), and it’s also why individual investors hold only 30% of all securities traded in the US; large institutions own and trade the rest in secret.

Declaring Economic Independence

A 2008 Ernst & Young report projected that the BRIC nations will contribute 40% of the world’s economic growth until 2020, while the US will only add 14%. At the first ever “BRIC summit” in 2009, Brazil, Russia, India and China met “to declare their economic independence from the US and the European countries that have long dominated the global financial system.” While the BRIC nations form a loose federation, their statement highlights “the tectonic shift” in shared global economic responsibility from the G7 (Western nations) to the G8 (plus Russia) to the G20 (“19 industrial and emerging-market countries plus the European Union”). A concrete example of this change occurred in July 2010, when the biggest ever IPO – $22 billion for the Agricultural Bank of China – launched while the Greek financial crisis preoccupied Europe and the US.

“The uncontrollable power of oil wealth is shifting geopolitical power across the world in ways we’re only beginning to understand.”

China invests worldwide with both economic and diplomatic ends in mind. Wielding billions of dollars, it has funded infrastructure development in India and Southeast Asia, extended credit to Argentina and made unconditional “concessional loans” to African nations. China’s interest in securing access to Iran’s oil explains why China routinely opposes measures against Iran’s nuclear program (although China gave its tacit approval to new UN sanctions against Iran in 2010). China aggressively seeks US technology, both in the open marketplace and through corporate espionage. US prosecutors have brought numerous cases against, and secured convictions of, individuals engaged in procuring classified technology, as well as in carrying out organized hacking and cyberspying efforts on behalf of the Chinese.

The Shadow Market in Action

When the shadow market acts, it exerts its tremendous power through complex and sometimes obscure methods. For example, when a bomb blew Pan Am flight 103 out of the sky over Lockerbie, Scotland, on Dec. 21, 1988, killing 270 people, investigators traced the terrorist act back to Libyan intelligence. Eventually, Scottish authorities convicted Libyan intelligence official Abdel Basset Ali al-Megrahi of the crime and sentenced him to life imprisonment in the UK.

“The only real way for the countries of the West to play the shadow market was to open their markets, engage the wealthy nations diplomatically and economically, and let the cash flow.”

But the Libyans wanted him back. British officials also wanted its energy corporations to get access to Libya’s natural gas and oil. Thus began a long-secret courtship involving banks, oil companies, and Libyan and UK diplomats. The cozy relationship worked. Despite protests from the US, in August 2009 the UK released an ailing Megrahi and returned him to Libya where he received a hero’s welcome. At about the same time, 150 UK firms opened new operations in Libya or received lucrative business contracts from the Libyans. And, in a neat exchange, Libya’s SWF, the Libyan Investment Authority, invested “hundreds of millions of dollars” in the UK.

“What European countries are most concerned about is their obvious loss of influence in the global arena.”

But not all SWFs operate in nefarious ways. Norway’s SWF, the Government Pension Fund Global, is unique in its approach: It follows a transparent, socially conscious investment program based on the “Santiago Principles” of fair and free trade. Its investment platform stresses shareholder rights and nonfinancial issues such as child labor, water management and climate change. Its managers are subject to scrutiny by an ethics committee. But the SWF doesn’t hesitate to take political stands on issues about which the Norwegian government feels strongly. For example, to send a message criticizing “Israel’s policies toward the Palestinians,” the fund disinvested in an Israeli company that provides observation equipment on the West Bank.

Shifting Currents

As the shadow market expands, Europe’s relative economic and political importance diminishes. In 2004, almost a third of global trade came from the 16 euro zone countries; by 2008, the EU’s share had dropped to 28%. As the recession of 2008 deepened, Europe’s economy declined, aggravated by problems in Greece, Spain and Ireland.

“At its core, the emergence of the shadow market is the story of geopolitical power shifting from West to East.”

Ironically, Britain failed to set aside its own oil revenues into a dedicated SWF when it discovered oil reserves in the 1970s. Instead, the money disappeared into government spending programs. In 2009, UK officials started asking SWFs to invest in British government-owned banks and assets. In contrast, France started a $28 billion SWF in 2008 with the stated purpose of investing only in French companies as a means of protecting them from takeovers by non-French investors. Germany took another tack: There, the government enacted legislation that would allow it to examine any proposal by a non-EU organization “to buy 25% or more of a German company.” The announcement angered Middle Eastern-based SWFs, so, under EU pressure, the Germans tempered the plan to permit investments that did not directly “threaten” state interests.

“We can argue over whether the development of the shadow market is good or bad...but that misses the bigger picture of what’s going on.”

The US faces similar issues with non-US investors buying into domestic companies. In 2009, Chinese firms bought more assets in the US than American companies purchased in China. Given the enormous pools of overseas funds, US corporations will increasingly look abroad to raise needed capital. After the 2008 recession crippled American industry, the US Commerce Department launched its “Invest in America” campaign to attract foreign investors. The campaign is working. Cash-rich countries like South Korea, Saudi Arabia and India are investing in the US to gain access to the huge American market. Wisconsin boasts a shopping center built with Chinese investors’ capital, and Georgia houses a Chinese soy sauce factory.

“The shadow market simply is. It’s a force in the world that we all have to deal with.”

All this is part of a change in political and economic supremacy moving from West to East. Experts predict that between 2020 and 2030, China will surpass the US as the world’s biggest economy; by 2050, India’s gross domestic product will equal America’s GDP. The US and the West may control less of their economic future, but the shadow market is here to stay.

About the Author

Barron’s and Kiplinger’s named Eric J. Weiner’s first book, What Goes Up, one of the best books of 2005. Formerly with Dow Jones Newswires, he has written for The Wall Street Journal, The Los Angeles Times and The Boston Globe.

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The Shadow Market

Book The Shadow Market

How a Group of Wealthy Nations and Powerful Investors Secretly Dominate the World

Scribner,
 


2 November 2025

The Master Switch

Recommendation

Great advances in communications technology start new industries, but the history of such breakthroughs shows a cycle of fragmentation, concentration, more breakthroughs and a splintered set of small companies. The web may defy this cycle, whether control of the web consolidates or remain diffuse. Historic patterns suggest that today’s major web companies may become part of larger media empires, centralizing control of online content. Columbia professor Tim Wu offers a rich saga tracing the evolution of telecom industries, technology and regulations and explains what these patterns portend. 

Take-Aways

  • A cycle of fragmentation, consolidation and decline in the face of new technology is endemic in telecommunications industries: telephone, radio, TV, cable and film.
  • How this cycle will affect the Internet remains to be seen. If conglomerates acquire major Internet firms, the web could become a “closed” system.
  • Technological advances often slow or slaughter existing telecommunications industries.
  • The US government has reacted to many telecommunications revolutions by delaying the adoption of disruptive technologies.
  • AM radio stations’ powerful owners squelched FM for years – with US government help.
  • Companies using “vertical integration” handle every aspect of a product or service. This was the initial structure in telecommunications industries.
  • In telephones, AT&T purchased its rivals in an early consolidation, but antitrust rulings split it into seven Baby Bells. Now AT&T and Verizon own the industry.
  • Television broadcasters built powerful networks using AT&T’s long-distance wires.
  • Then cable television’s satellite transmission revolutionized their industry.
  • Hollywood’s studios lost power after antitrust rulings made them sell their theaters.

Summary

A Cycle of Revolution, Fragmentation and Consolidation

Revolutions in communications technology encourage the formation of new companies that outperform old businesses based on outdated technologies. The fragmented frenzy of these revolutions fades as dominant companies buy or bankrupt smaller competitors. The diffuse nature of the Internet is the antithesis of centralized control, public or private, but if history is a useful guide, disjointed control of online content may yield to more concentrated power over the Internet. After all, the commercial forces of consolidation and concentration have prevailed in every communications revolution since the invention of the telephone in the late 1800s.

The Birth of the Bell System

The telephone, like subsequent major advances in communications technology, had several contemporaneous inventors. On the same day in 1876, inventors Alexander Graham Bell and Elisha Gray both registered for US patent protection for telephones they developed separately. Professor Bell had scant interest in running a business, but access to capital ultimately set him apart from other inventors. In 1877, he and a group of investors founded the Bell Company. By 1878, Bell’s biggest competitor, Western Union, the telegraph monopoly, offered its own local phone service. Bell’s small firm might have disappeared if it hadn’t filed a lawsuit that year for patent infringement against Western Union, claiming Western Union’s phones infringed on Bell’s patented design. The parties settled; Western Union agreed to leave the phone business forever.

“By the late 1930s, every one of the 20th century’s new information industries was fixed in its centralized imperial form.”

The Bell Company, renamed American Telephone & Telegraph (AT&T), attained monopoly status after an extended fight with numerous small phone companies. After Alexander Graham Bell’s telephone patent lapsed in 1894, investors funded the start-up of hundreds of these “independent” phone companies. AT&T fought back by refusing to connect its network with other firms and by undercutting its rivals’ prices, putting many independents out of business.

“The conglomerate is the dominant form for information industries of the late 20th and early 21st centuries.”

Eventually, instead of destroying its rivals, AT&T began buying them. In 1909, it acquired Western Union, its “childhood tormentor,” gaining control of all long-distance instant communication wires. Federal prosecutors threatened to attack this massive consolidation, but they did not splinter the system. The US Department of Justice later filed an antitrust suit against AT&T, which it settled in 1913 under a consent decree called the Kingsbury Commitment. AT&T agreed to charge “fair” rates, which government regulators would set, and to divest itself of Western Union. The pact forbade AT&T from buying independent phone companies in more than 1,000 markets. But, by avoiding a court-mandated breakup, AT&T could “consolidate the industry unmolested” in the guise of an “enlightened monopoly.” Functioning as a “common carrier,” it managed to keep its core business intact until the 1980s.

The Breakup and Reconstitution of AT&T

An antitrust lawsuit against AT&T concluded in 1984 with a federal court order to break the company into seven regional units (the “Baby Bells”) to encourage telecommunications competition. AT&T kept its long-distance business, its Bell Laboratories research arm and its equipment-manufacturing unit. After the US enacted the Telecommunications Act of 1996, Bell Systems reconstituted itself. The law was supposed to encourage competition by allowing Baby Bells to offer cable TV service, letting cable operators sell phone service and permitting long-distance providers to offer local calling. Its most “decisive impact” was to clear the way for a reconsolidation of the phone industry. The 1996 law superseded the 1984 decree, substituting Federal Communications Commission (FCC) regulation for court supervision of the Bells, shifting them “out of the line of antitrust fire.” This provision had a lasting impact: It paved the way for acquisitions that made the Baby Bells into subsidiaries of two dominant phone companies, Verizon and AT&T.

No Business like Show Business

A cycle of industry fragmentation and consolidation also unfolded in the film, radio and television industries. The film industry has shown a periodic tendency toward consolidation since the early 20th century, when the Edison Motion Picture Patents Company of New Jersey licensed the use of founder Thomas Edison’s patents on film projectors and various movie technologies. Other companies patented comparable machinery, triggering years of litigation. The main litigants, Edison and film manufacturer Eastman Kodak, settled in 1908 by pooling ownership of their patents in the Motion Pictures Patent Company, called the “Film Trust.” Its control of patents enabled the Film Trust to dictate all aspects of the cinematic industry until 1915, when a federal court found it guilty of price fixing and dismembered it. Gradually, Hollywood studios replaced the Film Trust with a cartel. The studios sold movies in “blocks,” not one by one. Theater owners had to buy the blocks because the sellers (Fox, MGM, Paramount Pictures, Universal Studios and Warner Bros.) dominated US movie production.

“The American government ended up failing to affirm a considered vision of what broadcasting should be, only following and accommodating the evolution of business models.”

Hollywood studio magnates also owned other moneymakers, reaching beyond production into distribution and exhibition. This “vertical integration” of all aspects of the cinema business was especially apparent in their national ownership of movie theaters. In 1938, the US Justice Department charged the studios with antitrust violations, prompting a decade of legal disputes. The court battles concluded in 1948 when the US Supreme Court ruled against the studios, ultimately forcing them to sell their theaters. By the turn of the 21st century, the major studios had become cogs in much bigger corporate machines. In 2008, Universal recorded $5 billion in revenue, a minor percent of its corporate parent GE’s earnings of more than $183 billion.

Radio, Television and the Federal Communications Commission

In 1934, Columbia University professor Edwin Armstrong invented “frequency modulation,” or FM, radio. Armstrong was working for RCA (Radio Company of America) on limiting the acoustical distortion of “amplitude modulation,” or AM, radio. Instead of improving AM, Armstrong invented a new way to transmit radio signals. FM was clearer and transmitted with less electricity than AM. Armstrong held the FM patent and expected to license the technology to RCA. But RCA resisted, because FM technology threatened its AM business. RCA’s anti-FM viewpoint found an ally in the US Federal Communications Commission (FCC), which slowed the spread of FM radio to protect the AM radio network run by RCA’s subsidiary, the National Broadcasting Company (NBC). The FCC banned commercial FM radio stations for the six years after Armstrong invented the technology. In 1941, the FCC finally permitted commercial FM broadcasts, but it discouraged investment in FM stations by limiting the range of their broadcasts.

“Western Union may not have fully realized that the telephone would actually replace, not just complement, the telegraph.”

The FCC took a very similar stance to discourage the rapid development of television, launched in January 1926. British inventor John Logie Baird demonstrated the first crude television set. Charles Francis Jenkins, a US inventor, followed with a similar demonstration almost immediately. Their primitive TV sets were mechanical devices with poor picture resolution. In 1928, Philo Farnsworth, a young San Franciscan, showed reporters the first electronic TV, which looked better and offered better picture fidelity. Alarmed at television’s potential threat to the status quo in mass communications, the FCC banned commercial TV broadcasts, permitting only a “few experimental” stations from the late 1920s to the 1940s. It enacted the ban “to avoid unsettling AM” station owners, including CBS and RCA’s NBC. In retrospect, by slowing the emergence of commercial TV, the FCC appeared to give RCA more time to prepare to control it.

“Net neutrality is what prevents the telephone and cable industry from killing Google, Amazon, Wikipedia, blogs or anything else that might incur their displeasure.”

Farnsworth obtained a patent for the first TV set in 1930, but he lacked the money to build an empire based on his technical creativity. He needed more financing to compete with RCA. When RCA began developing its own TV (in part with information one of its men gathered by touring Farnsworth’s shop), he sued for copyright infringement. Farnsworth never became a TV tycoon, but RCA had to pay him $1 million, plus royalties, to license his TV technology. At that point, RCA’s powerful NBC network took over television.

Cable and the Conglomerate Trend

In the 1940s, the cable television industry was a splintered, scattered collection of amateur operators, often farmers who erected wire networks to broadcast TV signals to remote areas. In the late ’50s, cable operators began to use microwave towers to transmit the signals over greater distances. The FCC tried to quiet the cable rebellion, showing its usual deference to the status quo. In 1966, it temporarily banned cable TV from the 100 most populous towns. That delayed cable’s long-term growth until satellite technology emerged, offering cable operators broadcasting power on par with the “long lines” of AT&T. By the 1970s, satellite transmission was the defining force in cable. In 1976, Ted Turner, “the essential pioneer of the cable network,” launched his Atlanta “superstation.” Thanks to satellite signals, his WTCG became the first channel offered “on basic cable nationwide.” Turner left AT&T’s wires in the past and launched a cable empire. Within a decade, almost a dozen cable networks began satellite transmission, including Turner’s Cable News Network (CNN), Music Television (MTV) and the Weather Channel.

“With the convergence of all communications by virtue of interconnected networks...the reconstituted giants of telephony are closer to possessing a master switch.”

The fragmented ownership in cable television operations consolidated. A handful of large, diversified companies now control much of the industry. General Electric, Disney and Viacom are leaders not only in cable programming and transmission, but also in films and broadcast TV. NBC, CBS, ABC and the big movie studios are subsidiaries of multinational corporations. The question now is if these conglomerates will consolidate ownership of major Internet companies.

Google and the Openness of the Internet

The Internet is a shifty challenge for older media – from radio and TV to magazines and newspapers – because it has the potential to replace them. Broadcasters and publishers are scrambling to attract online audiences by creating their own websites. But the most popular sites tap the web’s full interactive power. Innovative firms – Google, Facebook and eBay – have created some of the world’s most widely used online services. Despite their leading positions, however, many of the biggest web firms someday may merge with bigger companies.

“Unlike almost every other commodity, information becomes more valuable the more it is used.”

Google is the Internet’s dominant search engine. As of 2010, it held the “master switch,” the most popular portal to data and entertainment. Yet it doesn’t own its transmission capacity or the content it delivers in the form of search results. This lack of vertical integration shields it from antitrust issues and benefits its users. Google’s lack of a proprietary interest in web content adds to the integrity of its search results. Google could lose its independence in a future merger or acquisition, perhaps in a deal that would transfer custody of the master switch to a big conglomerate. Consider what would happen if a diversified producer of TV shows, movies and music acquired Google and then steered online searchers to its proprietary entertainment. If either AT&T or Verizon acquired Google, it might limit the access that users of the rival network have to Google. In either case, a “closed” quality would replace the “open,” or agnostic, nature of Google searches. Commercial control of online content could become concentrated if Google and other big Internet firms meld with large conglomerates that want to give users a narrow, or closed, set of options.

The Vertical Integration Issue

Vertical integration historically has been a prelude to the creation of information industry monopolies and oligopolies. Concentrated power, in turn, has stifled innovation and, in some cases, slowed the advance of communications technology. Legal change is necessary to encourage not only innovation but also commercialization of new technology. AT&T, for example, developed the first telephone answering machine in 1934 but refused to sell it, fearing that it somehow would hurt its main telephone business. Similar concerns led AT&T to suppress development of other products for years after inventing them, including mobile phones, fax machines and fiber-optic transmission capacity. Better governance would deter online business activities that undercut public needs to fill commercial goals. The best approach would be a constitutional ban, not merely a regulatory restriction. Preservation of an open Internet demands preventing business combinations that allow vertical integration of online service delivery.

About the Author

Tim Wu is an author, a policy advocate and a professor at Columbia University.

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The Master Switch

Book The Master Switch

The Rise and Fall of Information Empires

Knopf,
First Edition:2010
 



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