Dana Blankenhorn

China White

When the history of our time is written, 20-30 years from now, it will be clear how China beat the U.S. in the race for the electric car market.

It was China’s industrial policy that done it.

China used policies best described by Joe Studwell in his book “How Asia Works.” It’s what Japan, South Korea, and Taiwan did. Government sets the strategy and tells business what it wants. It creates incentives allowing business to ignore short-term losses and do it. Then it pulls those incentives once the mission is accomplished, consolidating the market in the strongest hands.

Chinese policymakers also knew, from the beginning, that lithium would be to electric cars what the operating system was to PCs, the point of control for everything above. Lithium has become the world’s China White. 

There is only one big winner in the electric car sweepstakes. China’s CATL dominates the battery space and is almost entirely home grown. Founder Robin Zeng is now richer than Alibaba’s Jack Ma, thanks to assuring ample supplies of lithium from his home country, but also Indonesia and the Congo. 

The Lesson of Buzzfeed

I have been out of Northwestern’s Medill School of Journalism for 45 years now, and the chief lesson I was taught there should still apply.

It came in my magazine business course. It was the only one I aced.

The lesson was simple. Know your reader.

Journalism is about organizing and advocating a place, an industry, or a lifestyle. You need to know who your target market is, organize that market, and represent its interests. That’s why newspaper publishers would go to chamber of commerce meetings. It’s why industry magazines organized trade shows. It’s why a publication’s mailing list was its key asset. Its why publishers exist, to sell, and why they stand above even editors on the masthead.

A Minor Announcement

Over the years my blog, and now my Substack, has covered everything from sports to history, from technology to urban planning.

Now, as I enter the last lap of my career, it’s time to focus.

From here forward, my main subject will be the business of technology. Other topics will intrude, they always do in my mind, but I have spent my entire life fascinated by the intersection of these subjects. I’ve learned a lot about them. And that’s what I want to share.

The first point I will make is, don’t get carried away by the AI hype. It’s important, but it’s not a destination. AI isn’t the Web, or the Cloud. It’s software, which can take huge inputs and deliver what appear to be rational outputs. Its key outputs won’t be music, or art, or stories like this one. It will be insights drawn from networks of sensors, on millions of devices, measuring systems as large as cities and hospitals. AI is a productivity tool, like a SaaS database, and its evolution is built on that base.

Beating Jim Crow

What Republicans in the South are trying to do is to reimpose the political and social order that went by the name of Jim Crow.

Between the 1877 withdrawal of federal troops, and the 1964 Civil Rights Act, the South had a social order based on racism and the misogynistic tenets of the Southern Baptist Church. This required strict separation of the races, and the sexes. Blacks were either exiled to the North or condemned to lives of brutality. It wasn’t slavery. In many ways it was worse.

What sustained Jim Crow was a leaky economic boycott by the North. Atlanta tried to resist it, with economic exhibitions, with education, then with social pressure. (To learn more about the struggle, read anything by or about W.E.B. Dubois (1867-1963).)

The “white” history of this period, from Henry Grady’s New South Speech to the story of Coca-Cola, is much less heroic.  What businesses mainly did was treat the South as a colony. Tobacco and cotton drew a price, but most of the value went elsewhere. What modernity came in, starting in the early 20^th century, was a century-old order of textile manufacture, drawn from New England by cheap labor. The South remained backward.

The status quo was protected by white race riots, by lynching, and by laws like Georgia’s “county unit system,” which prevented liberals from ever winning statewide by requiring candidates to win a majority of its 159 counties. This was defended by poor white farmers, the “wool hat boys”  whose muscle, and guns, maintained segregation.

The North built railway networks, utility systems, then scaled high-margin manufacturing. The South didn’t. That is, until the advent of air conditioning which, combined with the Civil Rights movement, blew the whole thing up.

The AI Silly Season

We’re currently in the “silly season” of hype over “Generative AI,” machine learning programs whose output can be text, code, pictures, audio, or video.

There’s a lot of experimentation and there are a ton of bad takes.

Here’s how it’s going to go.

There are two things to know.

First, any software requires training before it becomes useful. Right now programs like ChatGPT are creating garbage. Interesting garbage, but garbage. As people learn how to get value from these tools, however, there will be huge jumps in productivity. The timing and size will differ from industry to industry, and from organization to organization. But it will happen. People will be able to do more, high-quality work in less time. This won’t reduce the need for people. It will give people more things to do.

Democracy is Hard

Here’s a truth no one likes to admit.

Being a citizen in a democratic state is much harder, and takes much more work, than being a citizen in an autocratic state.

You need to think about things that may not matter to you. You should vote. If called upon, you have to drop what you’re doing and be a juror. Even if it takes weeks.

It’s a lot easier to just complain about government and keep your head down than take public affairs seriously. You have a life. You’re just trying to get by. Democracy, if you’re poor, comes off as a middle class affectation. Most people in this world are poor. Very poor. Even wretchedly poor.

The (New) Generation Gap

As we boomers aged, we avoided the Generation Gap that bedeviled our parents.

We didn’t disagree on the war. We let them indulge their passions. We tried to be friends and, while that wasn’t always a great idea, it did keep the peace.

But now that they’ve grown, that gap has finally arrived, in a way we never saw coming.

In a way it’s class warfare. Today’s millennials have less money than we boomers did. Most can’t afford a home. Many can’t even afford a car without help.

They’re not as heavily into things anyway. Their emphasis is on living. This is an over-generalization, of course. Some 30-somethings do have McMansions. Some own giant pick-ups. But most rent, and the rent’s too high.

Beating Moore’s Law

I spent 20 years, off and on, researching Moore’s Law, its history, and how it worked. 

As I wrote my book, and rewrote it twice more, most industries succumbed to its charms, its promise of productivity. Journalism succumbed. Retailing succumbed. So did distribution and management.

Three industries have not yet succumbed, and I have a chapter in the book devoted to them.

These are health care, the law, and education.

It’s not that there aren’t solutions. Law libraries are obsolete. So, too, college libraries. Health care has finally surrendered to electronic records, lured by sweet, sweet stimulus cash.

But final costs, and prices, have gone up in all these areas.

It’s politics.

States refuse to define what graduates need, and unions insist teachers must give the lesson, not just test and tutor. Courts have used technology to pile more work on lawyers and judges. Time is money. Doctors have used their gatekeeping function to stop standardization of treatment, while drug companies have used regulatory capture to create pricing based on the value of your life.

SBF 30 (or higher)

“White collar crime” is crime.

Robbing someone at pen point is worse than doing it at gunpoint. You’re in a position of trust. You have a fiduciary responsibility. You are supposed to have ethics, before you have the law, to guide your actions.

Break all of that and it can be murder. People die when their wealth and future is stolen. White collar thieves steal college educations, they steal retirements, they steal food from the mouths of grandbabies. They make every honest businessperson suspect.

I thought everyone felt that way until I heard Michael Lewis, author of The Big Short and other light classics, interview Harvard Business School professor Eugene Soltes on his podcast Against the Rules.” 

Everything is Liquid

What happened to Silicon Valley Bank is known as a liquidity crisis.

They had plenty of assets. But the assets were in instruments whose value had fallen, that weren’t worth as much as the bank claimed. When Peter Thiel and his bros learned this, they all pulled out their money at once and the bank collapsed.

The main lesson is that everything is now liquid.

Financial assets are liquid. Political assets are liquid. Your reputation and marriage are liquid.

Before the Web was spun this wasn’t the case. It would take time for depositors to pull their money out of a bank, time the bank could use to sell assets in an orderly way. There were still runs but these could be managed through regulation.

This time the fall was sudden, and the punishment had to be severe. The executives all lost their jobs. They deserve to face criminal charges, for cashing out while the walls were falling around them. Everyone who invested in SVB or its debt lost all their money. That’s a hit of nearly $100 billion, mainly to very rich people. Hopefully it teaches other banks to manage their assets better, to sell out money-losing securities quickly so they’re not caught out, in other words to be more transparent.