▫️ America's Nuclear Command Ran on Floppy Disks Until 2019. Ask Why.
A 1970s IBM computer handled functions for missiles, bombers and tankers, and replacing it kept losing.
▫️ THE CORE TOPIC
When a business chooses a supplier it runs a price comparison. Two quotes, two feature lists, one decision. The price is the smallest number involved and the only one anybody writes down.
The number that decides the next twenty years is what it would cost to leave. Washington makes the point at national scale: the federal government planned to spend over $90 billion in one year on information technology, and most of it went on operating and maintaining systems that already existed.
A system stops being a purchase and becomes load-bearing. Records pile up in its format. Staff learn its quirks. Other systems are built to speak to it. Auditors sign off on the version installed. None of that appears on the invoice, and all of it has to be paid again by anyone who wants to change.
Which is why a supplier sitting inside a customer's operations is a different kind of business from one that merely sells to it, and why the largest buyers sometimes take positions in the companies they depend on.
▫️ THE MECHANISM
Four things turn a purchase into a fixture.
- The invoice is the smallest line. Migration, retraining, parallel running and the weeks when nothing works properly are the real bill, and none of them are quoted.
- Data has gravity. Records accumulate in one system's format over years, and moving them is a project with a plan and a risk register rather than a transaction.
- People are part of the installation. Staff know where the thing breaks and how to work around it, and that knowledge is worthless anywhere else.
- The risk is asymmetric. Keeping something that works carries a known cost. Replacing it carries an unknown one, and whoever signs the order owns the difference personally.
The result is that a supplier embedded inside a large organisation ends up measured on how hard it would be to remove rather than on what it actually charges.
▫️ THE CASE FILE
The most literal version of this belongs to the United States government. In May 2016 the accountability office reported that the Defense Department's 1970s-era IBM Series/1 Computer and long-outdated floppy disks handled functions related to intercontinental ballistic missiles, nuclear bombers and tanker support aircraft.
The hardware was not kept because anyone thought it was good. It was kept because it worked, the people running it knew exactly how, and the cost of getting a replacement wrong was not counted in dollars.
The disks were finally replaced with a solid state storage system in 2019, three years after that report and more than four decades after the computer arrived. The economics never changed in the interval. Only the willingness to run the project did.
▫️ THE PRESSURE TEST
- Entrenchment is usually earned. A system nobody wants to remove is generally one that did its job for a long time without failing.
- It binds the owner too. A company sitting deep inside its customers is also inside their budget cycles, their politics and their procurement rules.
- Nothing holds forever. Mainframes, film, landlines and directories all looked immovable until something arrived that made switching cheap.
- High switching costs can conceal decay. Customers who cannot leave stop complaining in the numbers, so a deteriorating product looks stable right up until it does not.
The holding with none of this attached is the plainest one in the portfolio. Metal has no integration, no migration, no vendor and no version. It changes hands in an afternoon, and the person receiving it needs to learn nothing at all.
▫️ AUTHOR'S LENS
The best question I ever learned to ask about a company was not what it sells or what it charges. It was what would have to happen for a customer to stop using it, and how many people would have to agree.That question sorts businesses faster than any margin analysis I know. And it is why the base of my own capital sits in the one thing that requires no agreement from anybody: no contract to exit, no system to migrate, no committee to convince.Build the structure. Ignore the noise. |  |
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