Dana Blankenhorn

Invisible Technology

What we call “technology” is usually just the icing on a very large cake.

The vast majority of code is invisible. We don’t see it. We don’t know how it works. We don’t know what it does. But it’s absolutely necessary or the whole edifice collapses.

For most of the last generation, however, we’ve obsessed over very visible technology, and created vast fortunes around it. PCs, consumer electronics, and iPhones are all very visible. The last mile of our Internet connections are fairly visible. Applications we use every day, like the word processor I’m using now, are visible. Games are very visible. The Web sites we visit to shop or interact, to learn or to play in, are all very, very visible.

Behind and below that, however, is an enormous amount of invisible technology. Operating systems are mainly invisible. It is when they become visible, when they cause us trouble, that they cause a problem. The Internet Protocol that runs the Internet is invisible. Only those who learn a lot and have mad skilz can understand it.

Solving The Problem of Abundance

Everyone is vulnerable to fighting the last war, and ignoring the conditions of this one.

For investors and policymakers, the great fears remain the currency and the money supply. I read it in every Seeking Alpha discussion thread, a pervasive fear that we’re about to be crushed because no one is going to believe the promises of the dollar, or that we’re running out of something essential whose lack is going to make our dollars worthless.

What this decade has shown, already, just halfway through it, is that those fears are baseless. The problems of scarcity have been replaced by the problems of abundance. There’s too much oil, too many commodities, too many cheaply manufactured goods on the market. There are too many devices, there is too much cloud, there are too many good movies and shows out there and not enough time to see them all.

Generation Gap

When David Bowie died last week, age 69, many wrote that he was “gone too soon.”

The point illustrates something important about our society today, and our politics.

Because David Bowie was never too old to rock and roll, and he was too young to die. (Ian Anderson of Jethro Tull, who wrote that lyric, is 68 and currently on tour – we have tickets.) Paul McCartney is still rocking at 73. Bob Dylan is 75 and still writing songs. I guess 70 is the new 60. (Which is good because I turned 61 last week.)

When older players refuse the leave the stage, it can be hard for a younger one to shine. That may not be true in arenas like music or sports, but it is definitely true in politics. Democratic front-runner Hillary Clinton is only a few months younger than Bowie. Her opponent, Bernie Sanders, is 74. Republicans can’t complain because their front-runner, Donald Trump, is 70. For those old enough to remember the issue of Ronald Reagan’s health in 1980, it’s a sea change.

It’s not entirely welcome, either. One thing a generational crisis should do is wipe previous history off the political map. Lincoln and Douglas didn’t debate the War of 1812. But 1968 is just as far removed from 2016 as 1812 was from 1860. Clinton and Trump could well try to re-legislate Vietnam. Both were active way back then.

Wishful Economic Thinking

Since I began covering markets in 2011, I have been constantly amused at how political views play into them.

When Republicans are in power, Democrats may actually want the market to go down. They will predict it, and they will be ignored by the Republicans. When the market does crash, as it did in 2008, Republicans will quickly ascribe it to something nefarious done by Democrats. Most Republicans now blame what happened on Bill Clinton and federal mortgage insurance. That was the first step in a process leading to the crash, because it created a system that was open to abuse and manipulation. But it was not, in and of itself, abuse and manipulation. That’s a process that was ignored by the Bush people.

The same is very much true in reverse. Republican investors refuse to accept that the 2009 stimulus worked to jump-start the economy and that the GM bailout worked. They even deny that Republican efforts during that period were useful, including the bailout of Wall Street. They pretend that Ben Bernanke and Hank Paulson were Democrats in disguise. (Bernanke has since said he is no longer a Republican, but does not say he is a Democrat.)

2016 and Technology Economics

Most economists have absolutely no idea what they’re talking about.

It’s not their fault. They have lacked the data to prove or disprove their theories. So they repeat those theories, year after year, decade after decade, and are surprised when economies don’t fit the theories.

Most of these are industrial age theories. Marx wrote in the 19^th century. The Austrian economists wrote in the early 20^th century. Their theories are products of their time, the idea that machines generated additional productivity slowly, and that operators would always be required for those machines.

Moore’s Law destroyed all these theories.

There was some recognition of this early-on. In 1971, when early technology pioneers like David Packard were in the Nixon Administration as part of his “California Mafia,” the tie between metals and money was broken. This was called the “Nixon Shock.” It was made absolutely necessary by Moore’s Law. Without it, the deflationary effects of technology improvement would have wrecked the economy. Imagine what gold would cost today if the whole economy had to be floated on it.

But the impacts of Moore’s Law aren’t just cumulative. They are, in many ways, exponential. The impact of clouds-and-devices on productivity are exponential. Imagine. You not only have a supercomputer in every person’s hand, one capable of automating not just office work but entire marketplaces, and these are connected, without wires, to more compute power than we could have dreamed of creating just a decade ago.