What is Y2K?

Y2K stands for a computer-programming issue related to the Year 2000. The Y2K was a bug that was expected to have serious economic and financial implications, which is why the Y2K definition may be interesting for traders and investors outside a computer science background. 

As the years led to the turn of the millennium, computer programmers and analysts were worried about a bug in the computer systems of the time. 

They were concerned that the systems wouldn't be able to interpret the change from the two-digit year ’99 to ’00. This was expected to cause corrupted data and malfunctioning, ultimately leading to a complete shutdown, which is what the Y2K bug means. The bug has also been referred to as the Millennium bug, the Y2K glitch, the Y2K problem or the Y2K error.  

Y2K explained

Because in the 1960s, big computers had lower storage capacity, computer programmers used two digits to save computer memory, instead of using the four digits typical for writing a calendar year. 

Given this framework, programmers speculated that computer systems couldn’t interpret when the last two digits of the year changed from “99” to “00”. They believed that unless the issue was corrected, computers would not be able to tell if “00” was 1900 or 2000. 

Why was Y2K a matter of concern?

The computer systems worldwide were likely to shut down due to the generation of high volumes of corrupted data, which was expected to have an extensive economic implication.

Several industries – from the telecommunications, financial services and utilities to the transportation and aviation industries – were expected to bear the brunt of this malfunction.

The corrupted data was expected to lead to delays or disruption of major transportation networks, issues in the production and distribution of electricity, and disruption in telephone and traffic signals, among other problems.

In 1996, Connecticut-based technology research and consulting firm Gartner Group (IT) estimated that the cost of this disruption around the world was going to be nearly $600bn, with 50% of the cost estimated to go into repairs in the US alone. 

The US Federal government was expected to pay up to $30bn in repair costs resulting from the malfunction. In fact, it was even anticipated that the large-scale economic impact of the disruption would induce a recession.

What was the Y2K solution?

To avoid this economic implication from the Year 2000 problem, the Year 2000 Information and Readiness Disclosure Act was considered and passed by the Senate on 28 September 1998.

The House of Representatives gave the green signal to the bill on 1 October 1998 by unanimous consent. The bill had provisions to shield firms from civil liability that generated erroneous statements in the Year 2000 unless they were generated as a result of negligence or human error.

To carry out the provisions mentioned in the bill, a President's Council was established under then-President Clinton, which consisted of senior officials from the administration and other institutions such as the Federal Emergency Management Agency (FEMA). The computer programming issue of Y2K was solved via three steps of “information technology, emergency preparedness, and response” as taken by FEMA. 

The systematic management approach led to synchronised decisions by the agency and helped avert the technical problem. The Y2K transition from 1999 to 2000 was smooth, owing to the elaborate preparations and technical backing.