Dana Blankenhorn

Word of the Year: Enshitification

Enshitification is what happens when principles go out the window.

Principles like service, like honor, like honesty, like “a little looking for the other fella,” as James Stewart said in Mr. Smith Goes to Washington, are what make civilization possible. When they disappear, as they have over the last several years, it doesn’t matter much what your system is or what your laws say. Those with power will take it, and only the strongest will survive.

This is mostly discussed today in the realm of politics. Words have lost their meaning and are often used to mean their opposite in the name of victory. Facts mean nothing and are simply denied in the name of power.

Sell Nvidia, Buy Amazon

These are heady days for Nvidia, and profitable ones for my retirement account.

I bought 100 shares of Nvidia about 5 years ago, which soon turned into 300. I sold one-third of them to get my money out, but the remaining shares are worth nearly $500 each.

Nvidia is the chief arms merchant to the cloud. Its GPUs are essential to AI applications. More important, so is its software. It’s the Nvidia software stack that keeps chip rivals like AMD and Intel from gaining traction.

I also own stock in Amazon.Com If you’re into AI, Amazon.com is the better opportunity.

While Nvidia is at the front-end of AI, Amazon is at the back end of it. It’s Amazon that will reap AI’s rewards, in its supply chain, in its warehouse operations, and in its media business. Imagine if you could speak to Alexa casually and get real answers.

Amazon’s AWS cloud still has one-third of the market. Its approach in AI is to offer a wide range of tools, rather than insist companies buy any particular one. This makes sense to me.

Productivity Explosion

Soon after being given a high tech beat at the Atlanta Business Chronicle, in 1982, I bought my first computer. (The picture was taken in 1981.)

I could suddenly write up an interview or press event in an hour. I would read it out loud and make corrections. Then my super-loud C. Itoh dot-matrix printer would buzz it up onto fanfold paper.

The fanfold would go to typesetters, who created long sheets they would paste onto boards, which became the paper. Plastic squares would be turned into pictures at the printer. The pictures would be clipped to each board and the whole collection driven 50 miles. Most papers were then mailed to subscribers, but some were bound for retail sale.

Back at the front end of this process I bragged I could do the work of three men. The noise, and my attitude, caused the paper to fire me the next year and hire the three men.

A few years later I visited my former boss in Houston and found everyone was working at terminals.

The Coming Disney Breakup

Walt Disney Co. is in play. (I remember getting one of these sent to me after the Disney Channel's launch in 1980.)

CEO Bob Iger fired his replacement and can’t find another one. The company is killing its streaming service by reducing content and raising prices. Its deal with Penn Entertainment, directly running a sportsbook, means ESPN is now incompatible with the main company’s business model. The resorts business is tanking, thanks mainly to climate change.

My guess is that the entertainment company will be sold to Apple, probably within a year. ESPN, ABC, and the parks will be spun out as separately traded companies. It might happen all at once.

The only reason to keep the whole thing together was “synergy.” A bad year for one division might be offset by a good year in another. The combination would then be a better investment than the parts.

But that’s not working. The movie business is dying. Disney is doing all it can to hasten that by refusing to bargain with its unions. If management and labor aren’t partners, you can’t do business.

The TV business was dead years ago. This includes cable.

The resorts business is increasingly divorced from the rest of the company.

The Internet is doing to the streaming business what it did to print. Paywalls take away 90% of your audience. Advertising rates keep declining because there’s too much free content. Live sports are viable but the billionaires who control teams and leagues keep pricing fans out of the market. If it’s all just about money, the players will gravitate to whoever offers more of it.

The First AI Crash

No technology trend goes straight up. There are always crashes along the way, as subsets of the trend fall behind, while others prove their worth.

This was true with the Internet. Search engine companies were falling even before Google was created. It’s why Wall Street wanted Yahoo to become a “portal.” (Wall Street knows nothing.)

This will be true for A.I. as well. It’s starting right now.

The “consumer side” will crash first. Things like ChatGPT were fun for a while, but the mass market is deciding it’s more like Pokemon Go than “the Google.”

For any technology to gain legs, it must prove its utility. It must create productivity. It must not only do things that weren’t available before, but it must make money doing it, and make doing other things easier.

Threads and Open Source

The Clouds were built with open source.

What’s now Meta Platforms got its start not with the “social network” of Facebook, but with the Open Compute Project. It’s an open source platform for building hyperscale data centers at minimal cost.

Thanks to Open Compute, Meta owns its own infrastructure. It also has thousands of programmers on staff, whose job it is to bring traffic to that infrastructure. But even with Threads, Meta didn’t forget where it came from.

Threads is being built to support ActivityPub, the open source system behind Mastodon and what’s called the Fediverse.

Each Mastodon server will shortly have a choice, whether to connect to or “federate” with Threads. Some will. Some won’t. If you don’t like the decision of your instance’s admin, you can choose another instance that meets your needs. Or you can set up your own.

In short, you don’t need Threads. Its only advantage is its scale since it will use Meta infrastructure. That’s also its disadvantage. It’s being built to collect data and monetize it. Mastodon isn’t.

The degree to which Cloud Czars like Meta and its four peers – Apple, Microsoft, Google, and Amazon – support the open source ethos they’re built on is always an open question. They will go back-and-forth on it, adding support here, withholding it there, based on their own business requirements.

Another Opening, Another Show

In my 45 year reporting career I have seen perpetual change.

I have also seen enough booms and bubbles to detect their pattern.

I am old enough now to have witnessed the PC boom, the networking boom, the Internet boom, the SaaS boom, and the cloud boom.

We’re now in the early stages of a sixth boom, the AI boom.

Here are some things I have learned from those previous booms, and busts.

First, second-mover advantage. Everyone talks about getting there first. It’s more important to get there right, to understand the value you’re creating and ignore distractions. There were dozens of PC companies in the 1980s, and hundreds of software companies back then that are no more. There were dozens of search engines before Google.

Second, do one thing right. That’s the secret of Apple. It can be hard to figure out what that one thing is. It changes. But once you find it, don’t let anyone distract you. Also, think about what’s under your hood, not just what you’re selling. If you’re wrong, the market will tell you.  

Third, don’t let bureaucratic success lead you to think your shit doesn’t stink. AT&T and IBM built vast internal structures, where individual success lay in believing their own press clippings. They thought they could see the future by looking up their own assholes. Never look in, always look out.

The Real Cause of Extremism

A lot of ideas have been mooted to explain Christian radicalism and Fascist extremism among my generation of Americans.

Its cause is the same as that facing southern aristocrats in the 1850s, the accelerating pace of change.

I won’t relitigate the 19^th century. But the 21^st has seen change at ludicrous speed. Moore’s Law leaves nothing untouched. There’s no stability, whether in business or socially. Everything has gone online, from money to entertainment to community. What has come out looks frightening.

The Death of Office Work

There’s a lot of debate going on about the “death of the office.” (To the right, the 1960 movie The Apartment, about the abuses of office life in your parents' time.)

Workers find they like working from home. Employers say they want us back at their desks.

What no one asks is whether we need an office at all.

What does an office do? It acts as a control point, an organizing structure. It’s where data is collected and where decisions are made. But that definition doesn’t require a lot of space or a lot of workers.

In software, an office is a factory. My wife spent 37 years on that floor, before COVID. Since then, she’s been at home. It’s a better location. It’s quieter. Coordination can be done by phone. She doesn’t need the commute, and her employer doesn’t need the expense.

This AI Boom Will Bust

The investment boom in regenerative AI that began in November is doomed. (To the right is what Cutout Pro  delivered when I asked it to illustrate the theme of this story.)

I can’t tell you how. I can’t tell you when. I just know it will happen.

I’ve seen too many of these things in my 45 years as a business reporter not to know that. I saw the Houston oil boom bust in the early 1980s. Then the savings and loan bust, the 1987 market collapse, and on and on. I spent three years predicting the dot com bust before it happened. This was followed by the 2000s’ housing bust, which produced the Great Recession, the COVID bust, and the 2022 tech wreck.

There have been dozens of smaller busts over the years. Every boom carries with it the seeds of its own destruction in what Gartner Group calls the “hype cycle.”  There’s a difference between the hype cycle and past cycles of panics, like the Tulip Panic or the 1929 stock market crash. That is, the hype cycle leaves something real behind. Gartner calls this the “slope of enlightenment” and “plateau of productivity.”