Invest in HAL?

The views expressed here are those of the author and do not necessarily reflect the views of Morningstar.

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.

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.

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 movies they did together, and audiences loved every one.

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!

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.

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 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.

This article originally appeared in the June/July 2018 issue of Morningstar magazine. To learn more about Morningstar magazine, please visit our corporate website.