Dana Blankenhorn

The Next Health Crisis

Drug companies keep pushing America toward its next health care crisis.

Biogen is the primary offender. Last year they delivered an Alzheimer’s drug called Aduhelm, pricing it at $56,000/year. If Aduhelm cured Alzheimer’s, a high price would be justified. But it doesn’t. It isn’t even proven to reduce symptoms.

Now they’re back, with a new medicine mainly developed by Eisai, the Japanese company that developed Aduhelm. This claims to improve cognition about 20% in people with early signs of the disease. That’s good. But it’s nowhere near a cure. There is every indication Biogen will demand a huge price on this medicine too.

There are two problems here, one business and one scientific.

Too Much Winning

Joe Biden is proving to be the economic nationalist Trump only pretended to be.

America isn’t just back, baby. We’re rolling over the world. The dollar is as high as it’s been in 40 years. Inflation is headed down, even if markets don’t yet know it. We’re at full employment. Even manufacturing is coming back.

But there can be too much winning. When everyone else, including your friends, is losing, winning makes you the bully.

That’s what is going on now. That’s the real message of the Swedish and Italian elections. Voters there are turning on the U.S. as an economic bully. We’re exporting inflation to them, and they’re looking at a very long, cold winter.

When you treat your friends like adversaries, they become your adversaries. It’s one thing to crush your enemies. Russia is being crushed. China is in very bad shape. But when everyone is on the ropes it’s time to be a good winner.

What built American prosperity is we were good winners. We won World War II, then instituted the Marshall Plan, aid and loan forgiveness meant to give democracy a chance against the Soviet Union. We were magnanimous toward Japan, too, so that by the time of the Korean War they were mostly in our corner.

This is another such time. The Fed’s interest rate hikes, which quadrupled what the best borrowers pay for money over just three months, are going to cure inflation. Many prices are already coming down. But we don’t have to treat inflation as Sherman did Georgia to win. It’s time to take the foot off the gas, not on behalf of America but on behalf of England, of Germany, of Japan, even of China. They’ve had enough.

Is the Volcker Precedent Wrong?

Fed chairman Jerome Powell is basing his anti-inflation fight on the success of Paul Volcker from 1979-1984.

The myth is Volcker sent interest rates higher than that era’s inflation, but the resulting recession set the stage for decades of growth to come.

What if it’s wrong?

I had already begun my reporting career in 1979. Volcker’s policy did cause pain. But interest rates didn’t start falling until the 1980s, and the Fed wasn’t the only cause.

The other cause was the State Department. In 1981 the Reagan Administration quietly negotiated an alliance with the Saud family based on a simple premise. They would sell oil in dollars and pump a lot of it. We would extend to them our military protection, specifically against Iran.

That alliance has held firm from that day to this. It held firm through the Gulf War. It held through 9/11, even though the attack was committed mainly by Saudi nationals and inspired by the son of a Saudi billionaire. It held through the disaster of Iraq.

It was this alliance that sent inflation down in the early 1980s, not Volcker’s Fed. Oil went from over $125/barrel to $80 in Reagan’s first term. Texas’ economy was crushed, but everyone else prospered. It was morning in America.

Our present inflation is also based on resources. Oil costs spiked from $80/barrel last September to over $115 in May. They’ve since fallen back to $80. The fall came about because we’re no longer in an economic era defined by resources.

Government is a bank. Money is a verb.

Once you understand this you can understand the 21^st century economy and Federal Reserve policy. If you can’t, rich people will lead you to believe things against your interest, like government debt is your mortgage or a trade deficit is money we owe other countries.

What follows is a simplistic explanation. A longer one can be found here. 

The amount of money in circulation should approximate what’s needed to sustain economic activity. In a normal time, you can see how much you need by its price and what’s happening to prices in the economy.

When there’s not enough money, as was true in the Great Depression, the Great Recession and under COVID, economic activity grinds to a halt. People don’t buy stuff thus people can’t sell stuff. In the first two events, there was too much stuff for the money available. In the latest case, there wasn’t enough money to buy the stuff.

The Three Big Challenges Boiled Into One

Nearly three years ago, after attending the Heidelberg Laureate Forum honoring great mathematicians and computer experts, I wrote a three part series on the big technologies of this decade:

• The End of Oil 
• The Machine Internet 
• DNA as a Programming Language 

This is a good time to revisit the trends. A recession is also the best time to start a new tech company. Incumbents are faltering and you get a clean sheet of paper to write the future on.

One Medium, Extra Large

When I was at Northwestern’s Medill School, 45 years ago, I was pursued by a singular idea. That was, all the media we studied would eventually become one.

At the time there were three majors at Medill (four if you count advertising). You could major in newspapers, in magazines, or in TV. It was easy to tell us apart. The TV majors dressed well while the print majors looked like the students we were.

While I haven’t made a fortune since, my idea has been fulfilled, even if the media industry still doesn’t know it.

There is only one medium now. This medium, the Internet.

There is no newspaper business, no magazine business. There is no TV business, no newsletter business. These are all just means to the same end, which is communication. The problem is we don’t know what the new industry is about.

Reject Panic

The best reaction for investors to what is happening in the stock market today is no reaction.

Traders and speculators should feel free to panic. People who own cryptocurrency should feel free to panic. If you define your wealth by your market position on a day-to-day basis, panic away.

But investors? No.

The underlying strength of the American economy is obvious. Moore’s Law runs in every direction, from clouds to chips to software to systems. Entrepreneurs are constantly finding ways to turn these resources into savings, into value worth buying and owning. America has never been stronger.

The Cloud is Hardening Borders

One of the biggest untold stories of 2022 is that of our hardening borders.

I’m not talking about national borders. I’m talking about borders between states.

This started with business. Since a worker can be anywhere, and so can a CEO, companies can now arbitrage their location based on local tax law. Tesla still employs people in California. So do companies like Snowflake, which now says it’s based in Montana because the CEO is there. Caterpillar is still an Illinois company but it’s moving to Dallas. They’re doing it to dodge taxes, moving just their CEOs, and their headquarters, to “low-tax” states.

The scam extends beyond income taxes. It goes to operations. It’s now common for companies to demand tax hand-outs in exchange for building the factories they intend to build anyway. Georgia is doing it for Rivian. Ohio is doing it for Intel. In all cases these companies are pushing tax burdens down, onto the middle class, away from where the money is.

The truth is there are no low-tax states. All states have similar responsibilities, so all states have taxes. Texas has high, regressive sales taxes and high property taxes, which hit the middle class hardest. California chose to target the wealthy with income taxes.

The tax war has been followed by states lobbing missiles at each other over national policies. The stunts cost their taxpayers cash but offer nothing in the way of relief. I’m not just talking about Texas and Florida transporting migrants to D.C. or Martha’s Vineyard. I’m also talking about California buying billboards offering help with red state pregnancies. It’s done in the name of local support, pushing national issues, owning red people in blue states and vice versa.

Trouble in GoogleLand

I own Google stock. I believe in Google’s cloud. Google search may be the most important advance of our time.

But Google, or rather Alphabet (GOOGL), is a very troubled company.

CEO Sundar Pichai has been all over the media, warning about it. Perks large and small that once cosseted Google engineers are going away. Programmers are being told to “add value” or else. The word “layoff” is being used.

A lot of people aren’t listening. Here’s why they should.

At its heart, Google remains an advertising company. Its products, for the most part, remain mediocre. Google Cloud continues to lose money while it buys market share. Google is also a global business.

However bad you think things are in the United States, they’re worse everywhere else. The easiest thing for companies to do when they’re told to hunker down is cut ad budgets. This makes Google very vulnerable.

The Real News Problem

The real media problem has nothing to do with monopoly, or politics.

It’s that media still hasn’t accepted the reality of the Internet.

In the year 2022 book companies still think they’re selling paper books. Newspapers still think they’re selling paper news. Magazines still think in terms of print. TV still thinks in terms of how TV was distributed before the Internet.

It’s done to preserve the appearance of monopoly. Eyes remain closed to the challenges, and the opportunities, of the Internet.

Take CNN. Even their critics have it wrong. The critics are worried about new commentators shoving right-wing politics down the throat of the public.