Anthony J. Pennings, PhD


Lotus Spreadsheets – The Killer App of the Reagan Revolution – Part 2 – Spreadsheet Capitalism Emerges

Posted on | November 9, 2014 | No Comments

In order to understand the widespread adoption of the spreadsheet during the “Reagan Revolution” and its political-economic implications, it is important to understand the context in which it emerged. In Part 1, I identified a number of characteristics of the Reagan Revolution that allowed the electronic spreadsheet to flourish. This included wide-scale deregulation and other actions that radically transformed the economy and restored finance-centered capitalism to its pre-New Deal dominance.[1] In this post I examine the transformation of the 1980s corporate landscape facilitated by PC-based spreadsheet-modeled mergers and acquisitions (M&A) activities.

The pertinent events go back to the stock market of the 1960s and a time when corporations were quickly merging and absorbing other companies, only to find their stock depressed by the economic conditions of the 1970s. By the time Ronald Reagan became president, they found themselves top-heavy, immobile, and ripe for takeover by new corporate raiders armed with computer spreadsheets, junk bonds, and several new strategies including the leveraged buyout (LBO). While the Vietnam War was heating up and NASA was testing technology for the trip to moon, many companies such as Beatrice, ITT, as well as Gulf and Western were busy buying up other corporations. The strategy was to elevate their revenues and create financial stability through diversification.

The formation of these “conglomerates” was generally met with eager approval on Wall Street and led to a rise in stock prices as a series of mergers combined different types of companies into mega-corporations. The top “Nifty Fifty” of the 1960s included such companies as Proctor & Gamble, Bristol-Myers, Xerox, Pepsico, and GE. They were considered ceaseless growth stocks and guaranteed long term investments. Companies like ITT, which got its start buying up Caribbean and South American telephone companies, followed the pack and also became conglomerates. Despite Nixon’s gold deregulation and signs of impending economic trouble, the DJIA finally surpassed the 1,000 mark in November 1972.

Economic conditions caused a major economic decline in the mid-1970s driving the stock prices of the conglomerates down as well. By 1974, the DJIA sank from its high of over 1,000 to nearly 600 and stock prices continued to stagnate throughout the decade. The fall was precipitated by the currency and oil crises as well as the newly created international eurocurrency markets that siphoned capital off to countries in need of dollar-denominated cash to pay for their rising energy costs. This combination of the global currency crisis, the rapid elevation of oil prices, and the movement of capital into the euromarkets for recirculation to developing nations around the world worked to drive down stock prices. By the late 1970s, As euromoney slipped back into the US, it created soaring inflation. The result was to drive the country into a recession with concurrent inflation a unique combination of economic stagnation with increasing price inflation was occurring that became known as “stagflation”. In response, the Federal Reserve followed a monetary policy that increased interest rates to reduce inflation.

Capital began to return to the US in the early 1980s, and it became available for mergers and acquisitions. High interest rates and a soaring government debt sent new money, especially from Japan, into the US. With investment confidence in the Third and Second Worlds badly shaken, the capital markets turned back to the American corporate sector. This was encouraged by the tax cuts of the Reagan administration as well as a lax attitude towards corporate mergers by its Justice Department. Although expensive, more capital became available for the stock market and the tide began to turn. During the period 1979 to 1984, corporations spent nearly half a trillion dollars to merge or acquire other corporations sparking the stock market and sending investor confidence soaring. The Dow-Jones Industrial average went from 800 to over 1200. Aided by a massive increase in military spending and deregulation in the airline, banking and telecommunications sectors, electronic money switched from syndicated lending for third world countries to bonds and securities to support corporate takeovers and high tech startups.

A new breed of financial analysts emerged, armed with electronic spreadsheets on their Apple or IBM PCs. They evaluated company after company looking for new buying opportunities. Their main strategy was to analyze companies to buy and divest of their pension funds or sell off marketable subsidiaries in a process called a leveraged buyout (LBO). With more money available from banks, corporate raiders used a number of strategies to attack the fat conglomerates whose stock prices had been hit hard since 1974. The basic strategy in raiding a company involved borrowing the money, often at quite high interest rates, buying a majority share in the corporation, and then selling off some of the company’s assets to pay back the loan. This process was portrayed in Oliver Stone’s (1987) Wall Street when the infamous Gordon Gekko attempted to break up the fictional Bluestone Airlines and sell off its airplanes and build condos where the hangars were located. Gekko at one point claims the real profits would come from raiding the company’s “overfunded” pension fund.

Another technique used was called “greenmail”. This strategy involved threatening to take over the corporation enough to scare the management into buying back up huge amounts of stock and in the process raising the price. The raider would initiate a LBO and buy a significant amount of stock. After the stock price rose significantly, the raider would sell their shares for a hefty profit.

These techniques often involved the use of junk bonds championed by Michael Milken of Drexel Burnham Lambert. These were high-yield bonds issued by corporations with low credit ratings. Milken persuaded a number of raiders to use junk bonds in their takeover pursuits. While junk bonds were used to build important information age corporations such as MCI and McCaw Wireless, they were also bought up by newly deregulated Savings and Loans banks that ran into trouble by the late 1980s.

Ultimately Milken was sent to jail in a controversial move, but in the meantime, Wall Street’s DJIA boomed from 800 in 1979 to over 1500 in the December of 1985. This was only the start of the run however, as it reached 2,000 in the first month of 1987 and nearly 2500 the autumn of the infamous “Crash of 1987”.

With the spreadsheet in action, financial activities increased dramatically. While the contribution of financial firms to the US Gross National Product (GDP) was just over US$32 billion in 1950, it grew to $400 billion in 1980 and rocketed to $626 billion in 1985. During this time goods production also grew significantly, largely due to the commercialization of Cold War technologies, but the economic contribution by the financial sector grew twice as fast, particularly during the first five years of the Reagan era when it grew by sixty-four percent. With the spreadsheet, more complex financial calculations could be done by significantly fewer people. But the most important factor was that the electronic spreadsheet made the information more accessible and available faster to the people who could use it. [2]

In the next segment of this analysis of the spreadsheet, I will introduce the more formal analysis of this tool and how it “remediates,” or incorporates other meditated tools.


[1] I’m repeating this quote from “Lotus Spreadsheets – The Killer App of the Reagan Revolution – Part 1”. It is from Peter Gowan’s (1999) Global Gamble: Washington’s Faustian Bid for World Dominance for emphasis.
[2] See Magdoff, H. and Sweezy, P.M. (1987) Stagnation and the Financial Explosion. New York: Monthly Review Press. For information on the finance vs. goods production see p.23.



AnthonybwAnthony J. Pennings, PhD is Professor and Associate Chair of the Department of Technology and Society, State University of New York, Korea. Before joining SUNY, he taught at Hannam University in South Korea and from 2002-2012 was on the faculty of New York University. Previously, he taught at St. Edwards University in Austin, Texas, Marist College in New York, and Victoria University in New Zealand. He has also spent time as a Fellow at the East-West Center in Honolulu, Hawaii.

AnthonybwAnthony J. Pennings, PhD is a professor of global media at Hannam University in South Korea. Previously, he taught at St. Edwards University in Austin, Texas and was on the faculty of New York University from 2002-2012. His first faculty position was at Victoria University in Wellington, New Zealand.


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