Dana Blankenhorn

The New Hybrid Cloud

You get a cloud. And you get a cloud. Everybody gets a cloud.

Well, most people.

Several years ago, the idea of the “hybrid cloud” died. The idea that companies should keep their data centers while moving “customer facing” applications only to the public cloud didn’t make economic sense. Cloud applications ran so much cheaper than systems designed for mainframes or internal networks.

It wasn’t just about hardware. It was also about software. Proprietary software couldn’t compete with open source. Linux won. Even Microsoft admitted it. Tech companies acted rationally, by extracting the equivalent of “monopoly rents” from their data center offerings, which hastened the move to public cloud.

Now things may be about to reverse. That’s because, as companies and organizations have gone “all-in” on cloud, they’re finding themselves with huge bills. If Google or Microsoft or Amazon is the “one throat you can choke,” they’re the ones choking you.

Law & Order Takes Time

Lefty Twitter has its undies in a bunch (as always).

It’s all about Trump and his henchmen. (Law & Order: SVU has now been on the air longer than the original show.)

The complaint is that justice has not yet been visited on any of them. In its way, a valid complaint. The fantasy that Biden might order Trump’s immediate arrest upon taking the oath was always just that.

What’s happening now is precisely what needs to happen. It’s far more delicious than the liberal fantasy.

After January 6, the FBI immediately began its investigations. As requisite prosecutors have had nominations approved, the Department of Justice followed.

Hundreds of insurrectionists have been arrested. More are being sought. Several have begun to squeal. A few have been sentenced. Others are awaiting trial.

Pay for the Clouds

Right now, the roughly $150 billion/year going into cloud infrastructure is paid for with cash flow. Most of that cash flow comes from free services.

It’s ad-supported services that are holding up the free Internet. It’s these ad-supported services that the clouds were first built to support.

The antitrust bills now zipping along in Congress try to end all the perceived “sins” of the Cloud Czars – Apple, Microsoft, Amazon, Google and Facebook. But they don’t answer the big question, which is where new cloud investment will come from if the Czars are broken up.

Amazon can do fine on its own. There is plenty of cash flow coming into Amazon Web Services to support its capital spending. Most of Amazon’s investment these days, in fact, is going into warehouses and transport fleets, which aren’t as profitable. Splitting AWS from Amazon, along with its digital services like Amazon Prime video, the Kindle eBooks, and Alexa cloud-based speaker, would be a stupendous opportunity for investors. It would let AWS grab share from Google and Microsoft because their clouds are tied to software that competes with their customers.

Mugwump

Mugwumps were a now obscure group of 1880s intellectuals who wanted honest government. (They were also a 1960s folk group , but that’s another story.)

Mugwumps started political life as Republicans who supported the civil service reform and regulation policies of James Garfield. They wound up switching sides in 1884, dooming any political ambitions, and supporting Democrat Grover Cleveland. (Theodore Roosevelt, who identified with them, didn’t switch in 1884, preserving his political career.)

The term originated with a man named Dana, in this case New York Sun editor Charles Anderson Dana. It sounds like it could have been coined by Mark Twain, who identified as one. It supposedly derived from an Algonquin term meaning “war leader,” and Mugwumps were derided at the time as political fence-sitters, their “mug” being on one side of the divide and their “wump” being on the other.

Mississippi: The Model Republican State

The Civil War isn’t over. It can still be lost.

The Civil Rights movement isn’t over, either. It is being lost.

Nowhere is this truth more obvious than Mississippi.

Mississippi had about 2.1 million people in 1960. In 2020 it had 2.9 million. It was only two states to lose population during the decade of the cloud. Its economic growth is anemic. Growth is best when federal receipts expand during recessions, or during economic boom times when gambling rises.

If Mississippi were a country, and not getting federal aid, it would be part of the Third World. It tried to build an oil economy, and a lumbering economy, but the big draw is still casinos, which line the Mississippi, the Gulf Coast. What happens when online gambling, and online sports betting, eliminates the need for casinos? It’s a question no one even asks.

Mississippi is a case study for current Republican priorities. Jim Crow never left Mississippi. He just adapted, giving local power where blacks held local majorities, but maintaining power through an all-white power structure that still survives.

Cloud Czar Conundrum

In 2021, governments around the world hate the Cloud Czars.

They don’t like seeing companies both build infrastructure and rent it out to competitors. They don’t want Amazon to compete with Netflix or Walmart. They don’t want Microsoft hosting Salesforce, then building its own suite. They don’t like Google doing search while it rents its cloud. They don’t like the Apple app store. They blame Facebook for Trump.

It’s not just here. China is doing all the things Americans just pretend to want, taking down Alibaba, Tencent and Baidu with new regulations and demands. Of course, the same people who want Facebook destroyed pretend that China is going after Alibaba because “it’s communist” and Jack Ma a threat to the regime. (As if Mark Zuckerberg isn’t?)

Here’s the problem. Clouds are expensive. The price started a decade ago at $1 billion/quarter. Now it’s about $5 billion/quarter. That money isn’t borrowed. It all comes from cash flow. The game was said to be too rich for AT&T, too rich for IBM, too rich for HP and Verizon.

Real Estate is the Republican Industry

There is an industry whose interests are solidly Republican, whose actions could derail both the technology industry and democracy itself.

That’s the real estate industry.

Real estate is the most inefficient industry we have. It’s all rent seeking, from plotting with government on what to build, through construction techniques that are a century ago, to a transaction model that’s as efficient as paying alimony with pennies.

A pro-business government would make sure housing was where the jobs were. A pro-business government would encourage new building technologies. A pro-business government would minimize real estate transaction costs.

We don’t have a pro-business government. We have a government in the pocket of the real estate industry.

The reason housing costs are so high is because, in league with government, the real estate industry makes certain of it. Everything is regulated locally, meaning it’s easy to lock-out affordable housing, which thus has a bad name everywhere else. Local building codes mandate that most homes and apartments be made of sticks and separates land uses with strict zoning laws. State regulators, working on behalf of the industry, create mountains of paperwork on every real estate transaction, driving up costs and creating artificial scarcity.

Why Business is Becoming Progressive

Most people don’t know this, because the relative positions of our political parties reversed during the Civil Rights era. For most of our history, business has been on the progressive side of politics.

There are reasons. In the late 19^th century, land grant policies that opened the West were considered progressive. In the early 20^th century, regulatory regimes kept input prices low for manufacturers and were progressive. During the middle of the 20^th century, spending that kept demand high was progressive.

It was only in the second half of the last century that business became politically conservative. That’s because resource industries don’t need people. The gating factor to growth is land. Control the land and you control the oil, the minerals, the agriculture, the market. The only people you need are cops and soldiers to enforce your control over the land. The dominant political players of the Nixon era were oilmen, or resource oligarchs like the Koch Brothers.

Labor Shortage

2020 was a turning point in many ways.

But the most important turning point was demographic.

The heart of the Baby Boom turned 65 last year. The heart of what was once called the “Baby Boom echo” is now in its 30s. Behind them are ever-smaller cohorts, a growing worker shortage that is turning labor relations on their head.

It’s just starting with the current return to work. Those offering cheap work complain they can’t get workers. Those offering well-paid work are finding many workers refuse to accept the expense of returning to offices. Older workers can retire. Younger ones can put out resumes.

This is a good thing.

Latinizing America’s Cities

One of the great fears I have for this decade is that our cities are about to be Latinized.

Blame the lack of gun control. Blame inequality. Blame whoever you like. Rich people, and the upper middle class, are scared to death, with good reason.

There’s also an historic opportunity opening the real estate market. The downsizing of office space looks permanent. Managers will complain, but it’s hard to see them foregoing the savings from renting less space. It’s hard to see knowledge workers forgoing the savings they get working from home. It’s not just the productivity. It’s being available 24-7, working until the job is done, rather than thinking of it from 9-5. It’s the clothes, the time wasted in driving to-and-from the job, the bad lunches. Uh, why?

What then happens to all that office space? It goes condo. It gets broken into apartments, with some co-working space and shops on the lower floors. I see a lot of security at the entrances. The steel construction, living above everyone, will make wealthy people feel safe. That’s Sao Paulo, skyscrapers and security surrounded by favelas, locks and armed guards, necessities for anyone with money.