Stanford University

Business

Post-9/11 Efforts to Reorganize the Intelligence Community

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Many critiques have been made of the U.S. Intelligence Community's performance in thwarting terrorist attacks (i.e. 9/11) and understanding the proliferation of WMD (i.e. Iraq). Given the reports from the 9/11 and WMD commissions as well as last year's legislation establishing the position of National Intelligence Director, what in fact are the deficiencies of the Intelligence Community and what changes have the best chance of correcting them and preventing future intelligence failures?

This seminar will feature a panel discussion by three experts on intelligence issues. They will focus their comments on the issues, challenges, and potential solutions for improving the U.S. Intelligence Community capabilities to provide timely warning and accurate assessments of future threats. They will then invite comments, questions, and discussion.

Sidney Drell is a professor of theoretical physics (Emeritus) at the Stanford Linear Accelerator Center and a senior fellow at the Hoover Institution. As a physicist and arms control specialist, he has been a leader in providing essential technical advice to the U.S. Government on national security issues. He is an active member of JASON, a group of distinguished scientists, and has served on a number of boards, including the President's Foreign Intelligence Advisory Board, the President's Science Advisory Committee, and the Non-Proliferation Advisory Panel.

Keith Hansen is a consulting professor of international relations teaching courses on U.S. intelligence and arms control/proliferation. His 35-year government career included seven years on the National Intelligence Council, where he managed numerous national intelligence estimates and other interagency studies on strategic and nuclear issues, and where he served as the National Intelligence Officer for Strategic Programs and Nuclear Proliferation.

Henry Rowen is Director Emeritus of the Asia/Pacific Research Center, professor of public policy and management (emeritus) at Stanford's Graduate School of Business, and senior fellow at the Hoover Institution. He was Assistant Secretary of Defense for International Security Affairs in the Department of Defense (1989-1991), Chairman of the DCI's National Intelligence Council (1981-1983), President of RAND Corporation (1968-1972), and Assistant Director of the U.S. Bureau of the Budget (1965-1966). Most recently, he was a Member of the President's Commission on the Intelligence Capabilities of the United States Regarding Weapons of Mass Destruction.

Reuben W. Hills Conference Room

Henry S. Rowen

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FSI Senior Fellow Emeritus and Director-Emeritus, Shorenstein APARC
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Henry S. Rowen was a senior fellow at the Hoover Institution, a professor of public policy and management emeritus at Stanford University's Graduate School of Business, and a senior fellow emeritus of the Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC). Rowen was an expert on international security, economic development, and high tech industries in the United States and Asia. His most current research focused on the rise of Asia in high technologies.

In 2004 and 2005, Rowen served on the Presidential Commission on the Intelligence of the United States Regarding Weapons of Mass Destruction. From 2001 to 2004, he served on the Secretary of Defense Policy Advisory Board. Rowen was assistant secretary of defense for international security affairs in the U.S. Department of Defense from 1989 to 1991. He was also chairman of the National Intelligence Council from 1981 to 1983. Rowen served as president of the RAND Corporation from 1967 to 1972, and was assistant director of the U.S. Bureau of the Budget from 1965 to 1966.

Rowen most recently co-edited Greater China's Quest for Innovation (Shorenstein APARC, 2008). He also co-edited Making IT: The Rise of Asia in High Tech (Stanford University Press, 2006) and The Silicon Valley Edge: A Habitat for Innovation and Entrepreneurship (2000). Rowen's other books include Prospects for Peace in South Asia (edited with Rafiq Dossani) and Behind East Asian Growth: The Political and Social Foundations of Prosperity (1998). Among his articles are "The Short March: China's Road to Democracy," in National Interest (1996); "Inchon in the Desert: My Rejected Plan," in National Interest (1995); and "The Tide underneath the 'Third Wave,'" in Journal of Democracy (1995).

Born in Boston in 1925, Rowen earned a bachelors degree in industrial management from the Massachusetts Institute of Technology in 1949 and a masters in economics from Oxford University in 1955.

Faculty Co-director Emeritus, SPRIE
Senior Fellow, Hoover Institution
Henry S. Rowen Speaker
Keith Hansen Visiting professor of international relations Speaker
Sidney D. Drell Professor of theoretical physics (Emeritus) Speaker Stanford University
Seminars

Distinguished Advisory Board leads SPRIE's Greater China Initiative

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In 2004, SPRIE launched the three-year Greater China Networks (GCN) research program. Its goal is two-fold. First, the GCN seeks to advance understanding of the systems of innovation and entrepreneurship that drive Greater China's ascendance in high technology. Second, it will study the nature and impacts of the region's integration into the global knowledge economy. The research agenda includes a focus on activities or institutions that underpin systems of innovation and entrepreneurship, especially for the new generation of ascending high tech regions in Greater China. These include university-industry linkages, globalization of R&D, venture capital, new firm formation and development, and flows of technology and business leaders.

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Homeland Security vs. the Madisonian Impulse: State Building and Anti-Statism After September 11

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Has the Bush administration used the War on Terror to consolidate power in the executive branch? Is the United States in danger of undermining civil liberties and laying the foundation for an American police state? Arguing against conventional wisdom the authors answer these questions with an emphatic No. Drawing on evidence from the USA Patriot Act, the creation of the Department of Homeland Security, the Transportation Security Administration, intelligence reform, and the detention of enemy combatants, the authors argue that what is most striking about US homeland security policy in the wake of 9-11 is just how weak the response of the American state has been. This outcome is contrary to both conventional wisdom and theoretical expectation. The authors argue that this puzzle is best explained by focusing on the institutional structure of US domestic politics.

Jay Stowsky is an adjunct professor at the University of California, Berkeley's School of Information Management and Systems (SIMS) and is the executive drector of UC Berkeley's Services Science Program. Previously, he directed UC Berkeley's program on Information Technology and Homeland Security at the Goldman School of Public Policy and served in the Clinton administration as senior economist for science and technology policy on the staff of the White House Council of Economic Advisers. Stowsky has also served as associate dean at UC Berkeley's Haas School of Business and as director of research policy for the University of California system. He has authored several studies of U.S. technology policy, including "Secrets to Share or Shield: New Dilemmas for Military R&D in the Digital Age," in Research Policy (Vol. 33, No. 2, March 2004) and "The Dual-Use Dilemma," in Issues in Science and Technology (Winter 1996). He is co-author, with Wayne Sandholtz, et al., of The Highest Stakes: The Economic Foundations of the Next Security System (Cambridge Oxford University Press, 1992).

Matthew Kroenig is a PhD candidate in the Department of Political Science at UC Berkeley and a Public Policy and Nuclear Threats Fellow at the Institute of Global Conflict and Cooperation. Kroenig's dissertation research explains the conditions under which states provide sensitive nuclear assistance to nonnuclear weapons states. Previously, he was a research associate with the Information Technology and Homeland Security Project and has also served in government as an intelligence analyst.

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Reuben W. Hills Conference Room, East 207, Encina Hall

Matt Kroenig PhD Candidate Speaker Department of Political Science, UC Berkeley
Jay Stowsky Adjunct Professor Speaker School of Information Management and Systems, UC Berkeley
Seminars

The Greedy Terrorist: Inefficiencies and Vulneralbilities in Terrorist Organizations

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Shapiro presents research he conducted with David A. Siegel, a student in Stanford's Graduate School of Business:

A review of international terrorist activity reveals a recurring pattern of financially strapped operatives working for terrorist organizations that seem to have plenty of money. This observation is hard to square with traditional accounts of terrorist financial and logistical systems, accounts that stress the efficiency with which terrorist financial networks distribute funds while operating through a variety of covert channels. In order to explain the observed inefficiencies, we present a hierarchical model of terror organizations in which leaders must delegate financial and logistical tasks to middlemen for security reasons; however, these middlemen do not always share their leaders' interests. In particular, the temptation always exists to skim funds from any financial transaction. To counteract this problem, leaders can threaten to punish the middlemen. Because logisticians in international terrorist organizations are often geographically separated from leaders, and because they can defect to the government if threatened, violence is rarely the effective threat it is for localized groups such as the IRA. Therefore leaders must rely on more prosaic strategies to solve this agency problem; we focus on leaders' ability to remove middlemen from the network, denying them the rewards of future participation. We find that when the middlemen are sufficiently greedy, and when the organization suffers from a sufficiently strong budget constraint, that leaders will choose not to fund attacks in equilibrium because the costs of skimming are too great. Further, we show there can be important non-linearities in terrorists' response to government counter-terrorism. Specifically, we find that given constrained funding for terrorists, government efforts will yield few results until they reach a certain threshold, at which point cooperation between leaders and middlemen in terrorist groups breaks down leading to a dramatic drop in the probability of terrorist success.

Reuben W. Hills Conference Room, East 207, Encina Hall

Jacob N. Shapiro
Seminars

APARC and Stanford University Press launch new publications series

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Rafiq Dossani
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On March 25, 2005, Stanford University Press will publish Prospects for Peace in South Asia, the inaugural book in a new series of "Studies of the Asia-Pacific Research Center." Designed to showcase APARC's cutting-edge research on contemporary Asia, the series will feature the varied work of the Center's faculty and the unique interdisciplinary perspective that informs it. According to Andrew Walder, director of APARC, "We are delighted to begin this series with Stanford University Press, which has a large and distinguished list of books on modern East Asia. It is a perfect way to showcase the best of the scholarly work to come out of APARC." Two more books have recently been added to the series pipeline.

Prospects for Peace in South Asia addresses the largely hostile, often violent relations between India and Pakistan that date from their independence in 1947. The most persistent conflict between the two neighboring countries over Kashmir has defied numerous international attempts at resolution.

The struggle over Kashmir is rooted in national identity, religion, and human rights. It has also influenced the politicization of Pakistan's army, religious radicalism, and nuclearization in both countries. Dossani and Rowen's incisive volume analyzes these forces, their impact on relations between the two countries, and alternative roles the United States might play in resolving the dispute. While acknowledging the risks, the book is optimistic about peace in South Asia. The key argument is that many of the domestic concerns -- such as territorial integrity and civilian-military rapprochement -- that had fueled the conflict have now abated.

"Volatile relations between India and Pakistan reflect issues deeper than territorial ambitions over Kashmir and predate their nuclear capability. That is a key theme of the book. The book is particularly timely: as India turns increasingly vibrant and globally important and Pakistan begins to clear the shadows of its past, policymakers need to understand the issues that will drive relations into the long-term," said Rafiq Dossani, co-editor, senior research scholar at APARC, and director of its South Asia Initiative. The volume's co-editor, Henry S. Rowen, is director emeritus of APARC, senior fellow at the Hoover Institution and emeritus professor of Public Policy and Management at Stanford's Graduate School of Business.

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North Korea: Thinking about Coercive Diplomacy, Regime change and Red Lines

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The Six Party Talks have failed to produce results, and the prospect of a negotiated settlement between the U.S. and North Korea appear to be dwindling rapidly -- North Korea has steadfastly refused to participate in any multilateral process; it says it now has a nuclear weapons and recently test fired a missile into the East Sea. These concerns exist amid current reporting that North Korea may at some point test a nuclear device. Philip Yun will discuss where he sees things going and talk about the prospects of a possible Bush policy based on a coercive diplomacy.

Philip Yun has had a career that encompasses politics, law, diplomacy, business, and now academia. Before joining Shorenstein APARC, Philip Yun was a senior executive of H&Q Asia Pacific, a premier U.S. private equity firm investing in Asia. From 1994 to 2001, he served as an official at the United States Department of State, during which he worked as a senior advisor to Winston Lord and Stanley Roth; served as a deputy head U.S. delegate to the Korea peace talks based in Geneva, Switzerland; and participated in high-level U.S. negotiations with North Korea, including trips to North Korea with Dr. William J. Perry and Secretary of State Madeleine Albright. Before entering government service, he practiced law at major firms in the U.S. and Korea.

Philippines Conference Room

Philip Yun

APARC
Stanford University
Encina Hall, Room E301
Stanford, CA 94305-6055

(650) 724-9747 (650) 723-6530
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Pantech Visiting Scholar
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Philip W. Yun is currently vice president for Resource Development at The Asia Foundation, based in San Francisco. Prior to joining The Asia Foundation, Yun was a Pantech Scholar in Korean Studies at the Walter H. Shorenstein Asia-Pacific Research Center in the Freeman Spogli Institute for International Studies at Stanford University.

At Stanford, his research focused on the economic and political future of Northeast Asia. From 2001 to 2004, Yun was vice president and assistant to the chairman of H&Q Asia Pacific, a premier U.S. private equity firm investing in Asia. From 1994 to 2001, Yun served as an official at the United States Department of State, serving as a senior advisor to two Assistant Secretaries of State, as a deputy to the head U.S. delegate to the four-party Korea peace talks and as a senior policy advisor to the U.S. Coordinator for North Korea Policy.

Prior to government service, Yun practiced law at the firms of Pillsbury Madison & Sutro in San Francisco and Garvey Schubert & Barer in Seattle, and was a foreign legal consultant in Seoul, Korea. Yun attended Brown University and the Columbia School of Law. He graduated with an A.B. in mathematical economics (magna cum laude and phi beta kappa) and was a Fulbright Scholar to Korea. He is on the board of directors of the Ploughshares Fund and a member of the Council on Foreign Relations and the Pacific Council on International Policy.

Philip Yun Speaker
Seminars

Prospects for Peace in South Asia

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The panelists will discuss the history and future of India-Pakistan relations, focusing on the most persistent conflict between the two neighboring countries, Kashmir. Since 1947 both countries have defied numerous international attempts at resolution and in 1998 entered its most dangerous phase when both India and Pakistan became nuclear powers.

Rafiq Dossani, senior research scholar at Shorenstein APARC, is responsible for developing and directing the South Asia Initiative. Dossani earlier worked for the Robert Fleming Investment Banking group, first as CEO of its India operations and later as head of its San Francisco operations. He has also been the Chairman and CEO of a stockbroking firm on the OTCEI exchange in India, the Deputy Editor of Business India Weekly, and a professor of finance at Pennsylvania State University. His most recent book is Telecommunications Reform in India, published in spring 2002 by Greenwood Press.

Dossani holds a B.A. in economics from St. Stephen's College, New Delhi, India; an M.B.A. from the Indian Institute of Management, Calcutta, India; and a Ph.D. in finance from Northwestern University. He is currently undertaking projects on business process outsourcing (with the support of the Sloan Foundation), innovation and entrepreneurship in information technology in India, the institutional phasing-in of power-sector reform in Andhra Pradesh, and security in the Indian subcontinent.

Henry S. Rowen, a senior fellow at the Hoover Institute, is Professor Emeritus of Public Policy and Management at Stanford University's Graduate School of Business and a member of Stanford's Asia/Pacific Research Center. He was Assistant Secretary of Defense for International Security Affairs in the U.S. Department of Defense from 1989 to 1991. He was also Chairman of the National Intelligence Council from 1981 to 1983. Rowen served as President of the RAND Corporation from 1967 to 1972 and was assistant director, U.S. Bureau of the Budget, from 1965 to 1966. He is a member of the Defense Department's Policy Board.

Rowen is an expert on international security, economic development, Asian economics and politics, as well as U.S. institutions and economic performance. His current research focuses on economic growth prospects for the developing world, political and economic change in East Asia, and the tenets of federalism.

This is the first lecture in ICC's CURRENT AFFAIRS series presented in collaboration with Asia-Pacific Research Center at Stanford University and the University of California at Berkeley.

India Community Center
555 Los Coches Street
Milpitas CA 95035

Rafiq Dossani

No longer in residence.

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Rafiq Dossani was a senior research scholar at Stanford University's Shorenstein Asia-Pacific Research Center (Shorenstein APARC) and erstwhile director of the Stanford Center for South Asia. His research interests include South Asian security, government, higher education, technology, and business.  

Dossani’s most recent book is Knowledge Perspectives of New Product Development, co-edited with D. Assimakopoulos and E. Carayannis, published in 2011 by Springer. His earlier books include Does South Asia Exist?, published in 2010 by Shorenstein APARC; India Arriving, published in 2007 by AMACOM Books/American Management Association (reprinted in India in 2008 by McGraw-Hill, and in China in 2009 by Oriental Publishing House); Prospects for Peace in South Asia, co-edited with Henry Rowen, published in 2005 by Stanford University Press; and Telecommunications Reform in India, published in 2002 by Greenwood Press. One book is under preparation: Higher Education in the BRIC Countries, co-authored with Martin Carnoy and others, to be published in 2012.

Dossani currently chairs FOCUS USA, a non-profit organization that supports emergency relief in the developing world. Between 2004 and 2010, he was a trustee of Hidden Villa, a non-profit educational organization in the Bay Area. He also serves on the board of the Industry Studies Association, and is chair of the Industry Studies Association Annual Conference for 2010–12.

Earlier, Dossani worked for the Robert Fleming Investment Banking group, first as CEO of its India operations and later as head of its San Francisco operations. He also previously served as the chairman and CEO of a stockbroking firm on the OTCEI stock exchange in India, as the deputy editor of Business India Weekly, and as a professor of finance at Pennsylvania State University.

Dossani holds a BA in economics from St. Stephen's College, New Delhi, India; an MBA from the Indian Institute of Management, Calcutta, India; and a PhD in finance from Northwestern University.

Senior Research Scholar
Executive Director, South Asia Initiative
Rafiq Dossani

Henry S. Rowen

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FSI Senior Fellow Emeritus and Director-Emeritus, Shorenstein APARC
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Henry S. Rowen was a senior fellow at the Hoover Institution, a professor of public policy and management emeritus at Stanford University's Graduate School of Business, and a senior fellow emeritus of the Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC). Rowen was an expert on international security, economic development, and high tech industries in the United States and Asia. His most current research focused on the rise of Asia in high technologies.

In 2004 and 2005, Rowen served on the Presidential Commission on the Intelligence of the United States Regarding Weapons of Mass Destruction. From 2001 to 2004, he served on the Secretary of Defense Policy Advisory Board. Rowen was assistant secretary of defense for international security affairs in the U.S. Department of Defense from 1989 to 1991. He was also chairman of the National Intelligence Council from 1981 to 1983. Rowen served as president of the RAND Corporation from 1967 to 1972, and was assistant director of the U.S. Bureau of the Budget from 1965 to 1966.

Rowen most recently co-edited Greater China's Quest for Innovation (Shorenstein APARC, 2008). He also co-edited Making IT: The Rise of Asia in High Tech (Stanford University Press, 2006) and The Silicon Valley Edge: A Habitat for Innovation and Entrepreneurship (2000). Rowen's other books include Prospects for Peace in South Asia (edited with Rafiq Dossani) and Behind East Asian Growth: The Political and Social Foundations of Prosperity (1998). Among his articles are "The Short March: China's Road to Democracy," in National Interest (1996); "Inchon in the Desert: My Rejected Plan," in National Interest (1995); and "The Tide underneath the 'Third Wave,'" in Journal of Democracy (1995).

Born in Boston in 1925, Rowen earned a bachelors degree in industrial management from the Massachusetts Institute of Technology in 1949 and a masters in economics from Oxford University in 1955.

Faculty Co-director Emeritus, SPRIE
Senior Fellow, Hoover Institution
Henry S. Rowen
Lectures

Pantech Fellowships for Mid-Career Professionals

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Pantech Fellowships for Mid-Career Professionals

This fellowship is intended to cultivate a diverse international community of scholars and professionals committed to and capable of grappling with challenges posed by developments in Korea. We invite individuals from the United States, Korea and other countries to apply.

Up to three fellows will be selected from among applicants currently working in the public or private sector, including government policymaking, business, journalism/mass media, non-government organizations, and other public services.

By supporting individual research projects and facilitating participation in KSP workshops and other collaborative activities at Asia Pacific Research Center (APARC), this program seeks to enhance each fellow's ability to engage and resolve issues related to Korea. Each fellow is expected to be in residence and produce a working paper or book on issues related to Korea (both North and South).

The length of the fellowship can range from three to nine months (between September and June). Fellows will be provided a monthly stipend of up to US $5,000 depending on experience and length of stay.

Applicants must submit a C.V., two letters of recommendation, and a research proposal (of no more than 1,000 words).

Submission Deadline: April 15, 2005

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Victoria Wu

Shorenstein APARC
Stanford University
Encina Hall, Room E301
Stanford, CA 94305-6055

(650) 723-9741 (650) 723-6530
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SPRIE Graduate Research Fellow
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Victoria Wu is a second year masters student in management science and engineering at Stanford University. Her professional experience includes work as a local TV broadcaster and science news journalist, assistant project manager at Genentech, and consultant in international investment and the video game industry. Topics of past research include business resource allocation, semiconductor materials, and high technology market investment in China. Raised in Anhui, China, she received a BS in Chemistry from the University of Science and Technology of China. Victoria has served as president of the Stanford Chapter of the International Society for Life Science Professionals.

Remembering Y2K: The Impact Today

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Rafiq Dossani
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Y2K was shorthand for the potentially disastrous failure of computer systems at the turn of the millennium. The problem: Many old software systems might read "00" as 1900--not 2000--a glitch that could lead to a cascade of errors and malfunctions. Year two thousand came, and nothing happened--well, not much anyway. A credit card mistake here. A satellite blackout there. But no lives lost. No global economic catastrophe. Monday, January 3 was just another workday. Yet with the benefit of hindsight the economic impact of Y2K on America was far greater than the $100 billion-plus government and business spent on fixing the computer glitch. Chris Farrell reports.

Chris Farrell: Remember the dot-com boom of the 1990s? It seemed as if every entrepreneur with a good idea and a PC could challenge established companies for customers. Brick-and-mortar companies jumped on the e-commerce bandwagon. The demand for digital workers soared. Long-time computer professionals hopped from job to job, pulling down more money with every employer. Newly minted college graduates juggled multiple job offers. But when the Y2K problem emerged in the latter part of the '90s business and government quickly realized there still weren't enough IT workers on hand to find and repair the computer glitch. The quick fix? Hire computer professionals overseas. And that temporary solution permanently changed the global economy.

Paul Saffo: Y2K was huge in getting the ball rolling on offshoring.

Farrell: Paul Saffo is director of the Institute for the Future, a high-tech think tank in Silicon Valley.

Saffo: But once they went overseas, they discovered it's not just a matter of cost. These programmers overseas are often better than the best you can get in the United States.

Farrell: Ireland, the Philippines, and Israel were among the more popular destinations for offshoring Y2K programming fixes. But India became the offshore capital. It had plenty of high-tech companies staffed with well-educated English speaking digital workers. Thanks to India's steep import barriers in the 1980s, no one could afford new computer systems. So Indian tech workers were the world's leading experts in the older software languages that needed upgrading. Suhas Patil is chairman emeritus of semiconductor maker Cirrus Logic.

Suhas Patil: And they were listening to their customers and what their needs were, and as the recognition came that systems had to be upgraded to not have the problem based on the Y2K issues, that's how they got their break.

Farrell: And made the most of the opportunity. AnnaLee Saxenian is Dean of the School of Information Management and Systems at the University of California, Berkeley.

AnnaLee Saxenian: I think the importance of Y2K was overwhelmingly about establishing Indian companies' reputation among US customers and helping begin a set of customer supplier relationships that have simply taken off in the last four years.

Farrell: Of course, Y2K contracts ended in 2000. Yet many Indian companies took advantage of their now sterling programming reputations to negotiate for more sophisticated work. Research. Software development. Accounting services. Long-distance medical advice. Rafiq Dossani is a senior research scholar at Stanford University.

Rafiq Dossani: India is now growing at 70-80 per cent a year in offshored services ... services which are maintaining an accounting system, maintaining an HR system, doing claims processing, that's growing easily at 70 per cent, maybe even higher.

Farrell: Offshore also came onshore during Y2K. The town of Mountain View lies at the heart of California's Silicon Valley. Housed in one of the many nondescript low-rise office buildings that crowd the region's business avenues is the Indus Entrepreneur, or TIE. It is a networking base for the Indian high-tech Diaspora.

Shankar Muniyappa: Y2K was a big opening as early as 98.

Farrell: Shankar Muniyappa is director of information systems for TIE. He came to America for Y2K-and stayed.

Muniyappa: Myself and many of us believe still believe this is the place where you need to be if you want to be middle of innovation.

Farrell: Some 30,000 Indian IT professionals now live and work in the Valley. Rafiq Dossani of Stanford University:

Dossani: At least 25 per cent of the start ups have Indian employees at fairly senior levels working for them. And ... there's a whole infrastructure therefore being built around them because it's a substantial number now, so you see shopping malls you see business services and so on catering to this particular immigrant community.

Farrell: That community is adding vitality to the American economy. Still, many American high-tech workers are threatened by the offshoring of white collar jobs. The numbers are murky, but according to Mark Zandi of Economy.com 370,000 non-manufacturing jobs moved overseas over the past fours years-with most of the information technology jobs going to India. Salaries are down too. Still, the big factor behind the loss of 1.5 million jobs lost since Y2K is improved business efficiency or productivity - not offshoring. And Y2K also played an important role in boosting business efficiency.

Economists initially looked at Y2K as a productivity killer.

Imagine a town threatened by a rising river. Every able-bodied person in town is put to work stacking sandbags. It's necessary work to save the town - but it's unproductive work. Nothing gets built. No food gets grown.

With the Y2K bug, programmers, chief information officers, project managers, and other digital workers were getting paid to do unproductive work - stacking sandbags of silicon. No innovative investments. No new productivity enhancing software.

But economists were wrong. Y2K wasn't a flood. Instead, think of it as clearing a path choked with underbrush. Once the trail is open, it is much easier to zip from point A to point B. Y2K gave companies an excuse to clean up their software and hardware underbrush - a critical factor in today's improved business productivity. Paul Saffo:

Saffo: A lot of companies said well, gosh, if we're going to have to spend all this money to fix our software let's also see what else we can do at the same time, so it was an invitation to replace a whole bunch of stuff. ... So it forced people to ask hard questions about how they were using things and in the best instances people really did become more efficient.

Farrell: The result? Companies used the new systems they installed to cut costs and work smarter - and hire fewer workers.

[Voice of Leonard Nimoy: "Do you have hard copies of all your important documents ... such as bank statements."]

That's Leonard Nimoy, Mr. Spock from Star Trek. He's narrating the Y2K Family Survival Guide video - one of thousands of products peddled by prophets of doom. Y2K did bring home how reliant we all are on computers. Many of us still don't back up critical data at home. The same isn't true for business and government. Many learned from Y2K just how vulnerable information systems are to a malicious attack or unforeseen disaster. Case in point: Y2K actually helped some businesses survive 9/11.

[News broadcast of President George W. Bush: "I've directed the full resources of intelligence and law enforcement communities to find those responsible and bring them to justice."]

The attack on the World Trade Center stopped trading on the New York Stock Exchange. Against the odds, that citadel of capitalism opened six days later.

John Koskinen: The reason the markets, securities markets, were able to open the Monday after the Tuesday of 9-11 was they still had the test scripts that had been developed in 1998 and 99.

Farrell: John Koskinen credits preparations for Y2K. He was President Clinton's Y2K czar.

Koskinen: ... they were able to in effect take all of those Y2K scripts and make sure that all the transactions with all of the major players would close. Without that they never would have been able to do it in the time frame with the confidence they had.

Farrell: A record 2.4 billion shares traded on the New York Stock Exchange the day it reopened.

Y2K was a unique economic event. Earlier jolts to the economy, like the 1973 oil price hike and the 2001 attack of 9/11, were shocks. But the Year 2000 arrived right on schedule. The surprise was how little immediate impact the much-feared transition had on the economy. Yet we're still living and working with the economic impact of Y2K five years later.

For Marketplace and American RadioWorks, I'm Chris Farrell.

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