KITSAP/BUSINESS—How must you see the world if you don’t believe in secrets? You’d have to think we’ve already solved all great questions. If today’s conventions are correct, we can afford to be smug and complacent: “God’s in His heaven, All’s right with the world.”

For example, a world without secrets would enjoy a perfect understanding of justice. Every injustice necessarily involves a moral truth that very few people recognize early on: in a democratic society, an illegal practice persists only when most people don’t perceive it to be unjust. At first, only a tiny minority of abolitionists knew that slavery was evil; that view has rightly become conventional, but it was still a secret in the early 19th century. To say that there are no secrets left today would mean that we live in a society with no hidden injustices.

In economics, disbelief in secrets leads to inefficient faith markets. But the existence of financial bubbles shows that markets Can have extraordinary inefficiencies. (And the more people believe inefficiency, the bigger the bubbles get) In 1999, nobody wanted to believe that the internet was irrationally overvalued. The same was true of housing in 2005: Fed chairman Alan Greenspan had to acknowledge some “signs of froth in local markets” but stated that “a bubble in home prices for the nation as a whole does not appear likely.”


The market reflected all knowable information and couldn’t be questioned. Then home prices fell across the country, and the financial crisis of 2008 wiped out trillions. The future turned out to hold many secrets that economists could not make vanish simply by ignoring them.

What happens when a company stops believing in secrets? The sad decline of Hewlett-Packard provides a cautionary tale. In 1990, the company was worth $9 billion. Then came a decade of the invention. In 1991, HP released the DeskJet 500C, the world’s first affordable color printer. In 1993, it launched the OmniBook, one of the first “super portable” laptops. The following year, HP released the OfficeJet, the world’s first all-in-one printer/fax/copier. This relentless product expansion paid off: by mid-2000, HP was worth $135 billion.

But starting in late 1999, when HP introduced a new branding campaign around the imperative to “Invent,” it stopped inventing things. In 2001, the company launched HP Services, a glorified consulting and support shop. In 2002, HP merged with Compaq, presumably because it didn’t know what else to do. By 2005, the company’s market cap had plunged to $70 billion—roughly half of what it had been just five years earlier.

HP Services

HP’s board was a microcosm of the dysfunction: lit’ split into two factions, only one of which cared about new technology. That faction was led by Toni Perkins, an engineer who first came to HP in 1963 to run the company’s research division at Bill Hewlett and Dave Packard’s personal request. At 73 years old in 2005, Perkins may as well have been a time-traveling visitor from a bygone age of optimism: he thought the board should identify the most promising new technologies and then have HP build them.

But Perkins’s faction lost out to its rival, led by chairwoman Patricia Dunn. Dunn argued that a banker by trade charting a plan for future technology was beyond the board’s competence. She thought the board should restrict itself to a night watchman’s role: Was everything proper in the accounting department? Were people following all the rules?

Amid this infighting, someone on the board started leaking information to the press. When it was exposed that Dunn arranged a series of illegal wiretaps to identify the source, the backlash was worse than the original dissension, and the board was disgraced. Having abandoned the search for technological secrets, HP obsessed over gossip. As a result, by late 2012, HP was worth just $23 billion—not much more than it was worth in 1990, adjusting for inflation.

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