Dana Blankenhorn

The Battle for Silicon Valley’s Political Soul

It’s now obvious, in retrospect that an era turned on November 14, 2007, when Barack Obama spoke at Google. 

The event was symbolic of a larger change going on in the economy, and thus in politics. Oil would be replaced by technology. Power, and responsibility, would move from Houston to Silicon Valley. The Kochs would fall, the Google guys would rise.

Of course, Silicon Valley hasn’t always been a liberal bastion. The original leaders of Silicon Valley were Republican. David Packard was an assistant secretary of defense under Nixon, during Vietnam. The Valley was always more about Apollo 13 than Woodstock. The Internet was a Cold War activity.

The 1939 Game

We are now 7 years removed from the Great Crisis that brought us Barack Obama. (We are also no further removed in time from the movie poster at the right was from the end of the war it portrayed.) 

For those keeping score at home, that means we are now playing the 1939 game, as that year provides the best analogy to our time.

In 1939, the world was slouching toward war. The West had returned to the austerity policies, negative growth and deflation of the crisis because bankers were back to making policy, and bankers don’t understand that money is a verb.

The bad guys of the time got this. Hitler ignored the bankers and re-armed his country. So did Japan. So did Italy. They demanded that money be spent, they directed it be spent on arms, and in the course of spending that money the economies of the Fascists grew rapidly.

In our time, bankers have far more control of the world than they did then, so austerity and deflation are more widespread. Austerity rules Europe, it dominates the U.S., and it’s becoming increasingly popular in China.

Only Vladimir Putin is prepared to ignore this reality and put money to work. He has sunk his currency, sunk his economy, but he has spent, believing that aggressive wars to win territory can succeed.

The Age of Human Capital

The 20^th century was dominated by resource capitalism. The great wars of that century were all built around a desire of great powers for direct access to natural resources – coal, gold, diamonds, and most especially oil.

The crisis we have just passed through, the one that began with the economic collapse of 2008 and the election of Barack Obama, is the last paroxysm of this old order.

Oil’s control of our economy is fading, just as manufacturing faded in the 1970s, production economics faded in the 1930s, and unregulated monopoly faded in the 1890s.

2015: The Year of Changing Leadership

Every business era has a leading industry, a ruling industry, and a fading industry.

It’s clear that for our time – for the rest of my life anyway – the leading industry will be computing and the fading industry will be energy. The rising industry will likely be biosciences, including everything from prosthetics to genetic engineering.

2014: Obama’s Triumph

Seen through the prism of a day, a week, or even a month, this seems to have been an “annus horribilus” for Barack Obama.

Hating him has become a national pastime. His party was pounded in the November midterm elections. For the rest of his term he will face a Congress filled with Republicans who are like rabid dogs in their personal hatred for him, and all he stands for.

In fact, history will record this as the year the tide turned, not only in President Obama’s favor, but in favor of the Obama Thesis of Consensus, which he represents.

The reason has to do with a history paper my own son wrote in high school. He chose to major in biology, but his 11^th grade paper contrasted the foreign policy approaches of John F. Kennedy and Ronald Reagan relating to the Cold War and the Soviet Union. It was pretty good.

Kennedy talked soft power but used hard power, military force, both in Cuba and in Vietnam. Reagan talked hard power but actually used soft power, diplomacy and economics, jawboning the price of oil from nearly $50/barrel down to as low as $8.

The immediate result of what Kennedy did was Vietnam. Reagan got the collapse of the Soviet Union.

Why Obama Threw the 2014 Midterms

Think of this as Volume 18, Number 45 of the newsletter I have written weekly since March, 1997. Enjoy.

---

What’s unique about the present crisis, which began in 2008, is that it has been so slow moving. It has been slow moving because it has been, for the most part, non-violent. It has been non-violent, in large part, because Barack Obama has refused to give-in to liberal Democratic calls for him to be more confrontational.

That makes sense when you understand the Obama Thesis of Consensus, which I first wrote about under that name almost six years ago but had been describing, under other titles, for almost three years before that.

Consensus implies that people come to agreement, despite sharp disagreement. If consensus is what you’re looking for the last six years have been a complete failure. Republicans continue to play politics based on the Nixon Thesis of Conflict , and most Democrats today want to play the same game.

Which leads me to this startling conclusion. Barack Obama threw the mid-terms.

The Stupid Abides

Think of this as Volume 18, Number 43 of the newsletter I have written weekly since March, 1997. Enjoy.

---

Every crisis period in American history proceeds in its own way, at its own pace.

What’s remarkable about the current crisis is how relatively non-violent it has been. This has extended the period of crisis.

Yes, there have been small wars, and police killings, and random violence. But we haven’t had a Vietnam, a World War II, or a Civil War. Global prosperity is actually high and rising, with millions in Africa and Latin America leaving extreme poverty every year.

In retrospect, this means Barack Obama will be seen as one of the great Presidents.

Whip Deflation Now

Think of this as Volume 18, Number 42 of the newsletter I have written weekly since March, 1997. Enjoy.

---

History doesn’t repeat itself but it rhymes.

Our decade reads like a bizarro version of the 1970s. We’re going through an oil shock, but it’s in reverse.

The 1970s were vulnerable to such a shock due to the nature of the economy. We were a manufacturing economy. Inputs of raw materials and wages determined prices and profits.

But beneath the headlines a new kind of economy was being born, one based on Moore’s Law.

The Existential Threat of 2014

Think of this as Volume 18, Number 40 of the newsletter I have written weekly since March, 1997. Enjoy.

---

While every real crisis in American history is based in economics, the existential threat behind it remains the same.

That threat is to democracy.

Democracy matters for the same reason capitalism matters, and for the same reason liberty matters. Democracy gives a society flexibility. In times of rapid change, and all times are times of rapid change, flexibility matters a lot.

Flexibility means you can adjust to change. And flexibility always comes from the bottom-up, never the top-down. Incumbent leaders either have a set direction that has always worked for them, or demand a set direction whether it is working or not. They want to stay on top, and that desire will always trump the need for change.

Democracy changes leaders. Capitalism brings change to the mix of products and services offered for sale. Liberty delivers new ideas and concepts to the market, to society, and eventually to leaders.

What drives democracy under is tribalism. When people are aligned by tribe, they stop responding to signals for change that are all around them. They follow their tribal leaders instead.

The War against Oil Remains The Real Battle of our Time

Think of this as Volume 18, Number 36 of the newsletter I have written weekly since March, 1997. Enjoy.

---

The darkness in any generational crisis consists of false choices, with advocates of “once and for all” solutions lined up against supporters of democracy, of liberty, and of free markets.

So far, democracy has won every time.

But when people are inside the crisis, it’s hard to tell that this will be the outcome. Until then, the crisis continues.

At this point it’s important to understand the nature of the current crisis. It’s not about the housing bubble, and it’s not about Democrats or Republicans. It’s about oil, which is in such artificial scarcity as to actually be the world’s currency. Those who have it have, since 1973, been soaking up the rest of the world’s wealth for themselves, and its political power, as the world runs on oil.