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Were the Y2K Preparations in Vain?

Matt AlsdorfPosted Thursday, Jan. 6, 2000, at 5:35 PM ET

During the past five years, governments and companies across the planet spent between $200 billion and $500 billion fixing the Y2K computer bug. Was this money spent in vain?

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Because no major Y2K incidents occurred, skeptics charge that it was. They suggest that the few minor glitches--such as the $91,000 late fee on a New York man's video rental--were easily corrected without spending billions. And countries such as Italy and Paraguay, which spent little on Y2K, appear to have fared as well as the United States, which spent $100 billion.

However, while the jury is still out, the emerging consensus of computer experts is that the expenditures were worthwhile. Here's their reasoning:

1. A lack of preparation would have cost more. If "critical" systems--such as power grids, defense computers, and hospital equipment--had not been fixed, disaster might have followed. To prove this thesis, one state applied no Y2K fixes to three of its computers. The machines shut down when they encountered Jan. 1, 2000. Even in non-critical systems, fixing errors after the fact would have been expensive. For example, the cost of correcting a couple thousand incorrect bills at a video store would far outweigh the cost of prevention. And many computer system managers liken Y2K preparation to auto insurance: Just because you didn't have a car accident last year, it doesn't mean your insurance payments were a waste.

2. Countries and companies spent money in proportion to their reliance on computers. Italy and Paraguay got away with spending less because they had fewer machines to fix: Paraguay's water and electric systems are largely manual; its capital city has only one phone line per 11 people. In the U.S., smaller companies avoided major Y2K expense because they were less likely than large corporations to have mainframe computers running outdated code.

3. The Y2K spending will have other positive results. Many companies solved their Y2K problems by buying and installing new equipment and software. Some of these upgrades would have been warranted, regardless of Y2K. Other upgrades will yield long-term benefits through improved computer infrastructure. And in the developing world, the technology upgrades provided "a vital advance into the computer age," according to the Washington Post.

4. Problems could still occur. Significant Y2K disruptions may appear well into the new year. Many errors won't be revealed until software processes data, which could be as late as the next quarterly billing cycle. Also, some computers don't recognize 2000 as a leap year, which means Feb. 29 could bring new problems.

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Matt Alsdorf is a Slate editorial assistant.

COMMENTS

Highlights from the Fray:

In Britain they are questioning the nation's expenditure on Y2K because of Italy's experience, a comparison that makes sense because apparently the 2 countries reliance on computerized systems is roughly similar. Britain vastly outspent Italy in combatting the Y2K problem yet Italy has suffered no more Y2K incidents than England. The whole point is whether the cost of ignoring the problem would have been greater than the cost of repairing the problem. In this case, it looks like much of the cash poured into solving Y2K was in fact, wasted. We would have had a few more errors at a lower overall cost.

--Jack

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Defense Department aside, I would guess that much of the money spent on Y2K in the U.S. was designed to avoid legal liabilities rather than disruptions per se. To the extent that legal settlements tend to exceed actual damages, the expenditures may have been partly a "waste" from a social perspective. I have not seen yet any attempt to relate Y2K outlays to national litigiousness. But it is interesting to note that America spent most, while Italy and (I think Japan) spent much less. Britain was in the middle. My guess would be that the legal systems could be ranked in a similar order. I suspect also that countries with the biggest financial sectors also tended to spend more. That would also explain the big outlays in the U.S. and UK.

--Game Warden

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I'd like to take issue with the justification that Y2K 'preparations' are like car insurance. This is a specious argument taking this to its logical conclusion, all people insured would never have a car accident. After all, weren't we assured that after compliance work was done there would not be a problem? The Y2K compliance work was nothing like insurance, which offers us financial compensation against the possibility of an unforeseeable random event. It was a calculated adjustment of systems which had a predictable, fixable potential for malfunction. Or at least that is what we were told by the "experts."

--Elizabeth de Vos

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