Dana Blankenhorn

Google's Favorite Mistake

Google has forgotten the key to its success. It's not search. It's not the one big computer. It's not even search or ad serving.

It's be the best.

When Google's name goes on a piece of crap, it's not just throwing something bad against the wall and hoping it sticks. It is cutting into Google's own reputation.

1. I have written before of how poor Google is with blogs. Both Blogger and Blogsearch are laggards next to Typepad and Technorati.

2. Google's Video Search is horrible. It doesn't find most stuff. It's no YouTube. Not even close.

3. Google's little software gadgets are just that, gadgets, and most don't work.
4. Froogle didn't work and got dropped from the main page, quietly.
5. Google Talk isn't making anyone forget Skype.
6. Have you heard anything about Google Checkout since it was introduced?

The fact that Google is coming out with something doesn't put the fear of God in anyone.

Those Crazy Haties

I'm beginning to think my daughter is right.

Calling the hate-filled extremists who represent the Nixon-Bush excess "hippies" is demeaning to hippies. The correct term should be "haties."

Haties (pronounced hate-ees) get off on bigotry, on violence, on all manifestations of hatred. They use hate as a drug, the way kids 40 years ago used marijuana. The danger, of course, is that today's expressions of hatred are just a "gateway drug," as it were. The LSD and opium, the heroin and cocaine, of the haties is going to be real violence. Watch your back.

Following are some recent Hatie sightings. (Pass on the meme.):

Rice Science Friday: Amoeba Know Their Relatives

As a proud alum of Rice University (class of 1977), I'm always happy  to highlight their latest scientific advances.

This latest comes from the biology department.

Amoeba have the ability not only to recognize their own family members but also to selectively discriminate in favor of them.

(I know, this explains Aggie loyalty, right?) The lead author on this study is postdoctoral researcher Natasha Mehdiabadi. She was assisted by Joan Strassmann and David Queller. (Larry Summers, take note again please.) Strassman is actually Dr. Strassman, a full professor, chair of the department of ecology and evolutionary biology. But note please that she didn't grab credit for Natasha's work. Credit where it's due, not just to the top of the chain.

Hey, if amoeba can do it, why can't professors?

Year of the Clip

In all the excitement over sites like YouTube and CrooksandLiars bringing video to the Web, one big point needs to be made.

These are clips.

The length varies. Sometimes the clip is less than a minute. Sometimes it's the length of a TV segment, about 8 minutes. But this is not what the TV industry expected when it started talking about "the video Web" a decade ago.

And it has spun out of their control. It has impacted everything -- not just politics. It has changed our relationship to the most important medum of our times, video.  And it's  often jaw-droppingly funny. 

What made this happen was YouTube, which broke the Web's "TV barrier."

YouTube's innovation was really quite simple. They traded screen size for resolution. A YouTube window covers a full quarter of your screen, while a standard MPEG window goes just a few inches on a side. They also standardized the use of codes to enable people to either embed or link to videos in a straightforward manner.

The result was an explosion of creativity, and a brand new Web. Not to mention bringing a whole new term to the mainstream, vlogging.

But the copyright industries are about to change that.

This Week's Clue: Taking It to the Streets

The following is the lead essay in this week's issue of my free weekly e-mail newsletter, A-Clue.Com.

You can get this in your inbox, free, by simply subscribing here.

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Over the last few years, while America has been obsessed with politics and war, Moore's Law has remained in the background, working its magic. (To the left is Mr. Moore, enjoying his well-earned retirement.)

Chips are getting faster. Radios are getting better. Optical fiber and disks get more powerful. Hard drives get bigger, the cost of storage continuing to plunge.

Thanks to open source we're even starting to see some progress on software. Not that software is any easier to write. But by making their development process transparent, open source companies can produce new, well-tested versions more quickly than their closed-source rivals, who have to rely on a beta test and QA process.

Why The Housing Number Matters

Yesterday's housing numbers may have the same impact as Time-Warner's purchase of AOL did in January 2000.

The Time-Warner deal put a ceiling on Internet stock values, and from there all those stocks plunged to the floor. News that new home sales dropped 4.3% while housing inventory rose to record levels last month could do the exact same thing. Only while the Internet bubble bursting only hurt investors with enough money to afford stocks, this will hit everyone. 

And it gets worse. Houses are not liquid, that is, you can't sell them quickly (as you can stocks). What happens is that houses go on the market and sellers hold-and-hold, waiting for a break. (The house here has been on the market over a year.) It's only after a "motivated seller" finally cracks that we learn what all homes in an area are really worth.

Once that price is established, everyone in the area becomes poorer. This has a major knock-on effect. People stop going out to eat. People stop spending on fancy coffee, chiropractors, aroma therapists and pet washings. Those merchants, in turn, start laying people off and going under.  This means commercial real estate becomes less valuable, and some corners become worthless. (We already have a glut of mall space.)

Pollyanna Is (Usually) Right

I switched on CNBC just now and saw “analysts” “arguing” over the course of the economy, yet what I heard, as always, was mostly happy talk.

England and Australia had benign housing corrections. There will be no crash. The stock market is doing fine. Inflation is higher, but modest. Don't worry, be happy.

So it always goes on the financial channel. The reason is that such people are usually right.

Most of the time the economy is OK.

The last recession, in 2001, lasted just six months, just like the previous one in 1991. By the numbers, recessions are short, sharp, and quickly corrected.

Market bears have to lean uphill against history. But when they are right, in market terms, they are very right indeed. The 2000 Internet Bomb was an explosive and terrible market crash. The East Asian Contagion in 1998 will not soon be forgotten by those who went through it. Neither will the 1987 crash, when the Dow fell over 500 points in one day.

Housing collapses and outright Depressions are even rarer. The last recession in American housing was in the 1970s, fueled by high inflation and interest rates. I was in college then. Most think me an old reporter now. For the last real economic collapse, you have to go back to the 1930s, and the Greatest Generation which survived it as children is now at death's d0or.

But market crashes do happen. Generational cycles do occur. Sometimes the bears are right.

And then, watch out.

Papers Make Sense for Gates Foundation

In the last two days I've seen an awful lot of snarkiness around word that the Bill and Melinda Gates Foundation were in on the purchase of former McClatchy newspapers by MediaNews.

Gates Foundation Saves Newspapers Too! screams the HuffingtonPost.

What does it say about the dinosaur newspaper industry that the world's richest man is investing in it? asks Seattle Weekly.

What it means is that Bill Gates is still smarter than you are, Ms. Post and Mr. Weekly (if those are your real names).

Ending the Next Depression

Update: The circus has apparently begun.

There are many strategies that can be deployed to prevent the next recession from becoming a Depression. But as I noted in my post about Ben Bernanke, the aim in these cases is to reduce liquidity.

Bernanke errs in thinking the next Depression will need more liquidity, which is what the last one needed. This will have the opposite cause, and will thus need the opposite cure. In fact, if we had that 1931 Federal Reserve Board things might work out OK. But we don't.

Remember, the big enemy this time is inflation, caused by an enormous number of "Eurodollars" and bonds held in foreign hands. You don't solve that problem by printing money. You solve it by convincing people you will, given time, make good on your debts, by getting them to hold on to the money they have.

So:

1. Cut the military budget. Get out of the occupation business. Get out of the "force projection" business. Concentrate on small, quick operations with limited goals and true national defense. Save hundreds of billions there.
2. Cut business subsidies. This is the fastest way to new free trade agreements. It also saves money.
3. Bring back the Clinton tax system. Cancelling the Bush tax cuts and re-instituting the Clinton rates is not going to kill an economy that's already dead. You need a glide path which leads to surpluses again.
4. Buy Latin America. The dollar's still worth something there. These are going to be fast-growing markets. Reducing our military projection will help here, but we need to treat these economies as equals in order to fend off competition from China. It won't be easy, but it can be done. This will also cut immigration.
5. Education and Research. This is where our limited government money must go. Big projects (in conjunction with allies), university research, and K-12 education will all pay big dividends. Everyone needs fiber to the home, but that needs to be a utility, which sells bits to all service providers on an equal basis. (The Internet is your Interstate Highway System.) Split the Bells between provisioning and services, or let them fail. Their choice.
6. Economic Nationalism. Stop supporting the export of jobs with subsidies to companies that do it. Those who don't live here do not deserve our protection.
7. Use the Bully Pulpit. People need to know that you're trying things, that you're doing something, that you're on their side.

The Real Economic Scandal

The biggest economic scandal of this decade has gone unremarked upon.

That is the inability of American technology companies to show stock market leadership.

Tech stocks have been in the doldrums since the Internet bubble collapsed. Intel is now down nearly 40% from its 2001 level, and remember that the bubble burst nearly 18 months before then. Microsoft is also worth less, despite an enormous campaign of stock buybacks.

You can say similar things about Cisco, or Applied Materials. AMD is an exception, up nearly 20% in part on Intel's weakness, and in part of the success of its Dresden, Germany foundry. The Philidelphia Exchange SOX index, which tracks the semiconductor industry as a whole , is still at near the level it achieved after an early 2001 collapse.

As goes the stock market so goes employment. Young people today are much less-likely to major in computer science than they were. American programmers are aging, fast. China and India are out-producing us in engineers, and will soon be out-engineering us (if they aren't already).

The only sector which has kept America afloat has been our Venture Capitalists. They have pushed many companies that launched in Europe to re-launch here, especially open source companies. But that success is limited. I was talking to Larry Augustin, still chair of VA Software (Slashdot) but now mainly a VC and company director. He confirmed that Chinese and Indian VC funds are growing fast, getting smarter, investing wisely. You just don't hear about them. Because they don't want the publicity.