Dana Blankenhorn

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.

Why Clouds Will Win the Streaming Wars

Since long before the streaming crash began, I predicted its Big Three would end up being Apple, Google, and Amazon.Com.

Not Netflix. Not Disney. Not Comcast or Paramount or Warner Brothers.

The Cloud Czars.

As usual, I was early to the story. But it has long been clear that, when push comes to shove in streaming, money talks. The coming result was easy for me to see and the story was easy to do.

Of the three Cloud Czars, Amazon is the best-positioned. They have the front-end technology with the Fire Stick, which has one-third of the U.S. market. They have Prime Video, which becomes a huge value if you use the Amazon store. They can re-sell every other streamer’s stuff and make money. They’re also global, something only Netflix and Disney among their competitors can lay claim to.

Where Computing Happens

I met my first computer in 1976, in the basement of Herman Brown Hall, on the campus of Rice University in Houston.

The computing happened in a big room, separated from me by a window. I passed a stack of punch cards, tied with a rubber band, through the window. They came back along with my output. Which usually said the program had died on Line 3.

By the time I got out of journalism school, two years later, computing was moving to desktops. A neighbor bought a $20,000 Cromemco machine that could run 3 terminals. She hired friends to work at the terminals, transcribing court records. I think they got 50 cents a page. Computing had come home.

Failures of the Cloud Czars

The failures of “Big Tech” aren’t what you think.

Each of the five “Cloud Czars” – Apple, Microsoft, Google, Amazon, and Meta – grew complacent over several years and let a strength become a weakness. They each now face problems that will cost tens of billions of dollars to fix. They’re cutting workers in growth areas and denying the reality.

This will spell more trouble in 2023, and opportunities for smaller companies.

I can summarize each Czar’s big problem in one word:

 

Apple – China

Microsoft – Windows

Google – Gmail

Amazon – Alexa

Meta – Facebook

Let's take 'em one by one

I Have a Dream for Netiquette

In the mid-1980s I joined a group called the Electronic Networking Association.

The ENA believed, naively, that if people could communicate across their differences, they might understand each other better.

Few people used the Internet then. We were all elites, intellectually at least. We were thoughtful and we shared a First World viewpoint, even if we lived in Japan, Europe or Africa. We shared values, sort of like the Quakers. 

What we believed in was Netiquette. These are simple rules for civilized behavior. Assume goodwill. Don’t yell. In short, be nice. When in doubt, apologize and resolve to do better.  

The punishment for a violation of Netiquette was a stern talking to, for both sides of the argument. The punishment for repeated outbursts was to be shunned by the group, dismissed, cast off.

The Coming Streaming Shakeout

Streaming is about to learn what the printed web learned 20 years ago.

In a world of unlimited content, the gating factor for your audience is time.

There’s a corollary. Don’t depend on ads to make up for this. There’s just too much inventory.

I have a bad tendency to be early to things. I screamed about the dot-com bubble in 1997. I’ve been yammering about the coming streaming crash since 2019.

But now it’s here. First Netflix (NFLX) fell from grace. Then Disney (DIS) did the same. The Cloud Czars are worth half what they were now that you can get paid for having money. When interest rates were 2%, a price to earnings multiple of 45 looked OK. With money at 5% you need to be below 20 to be competitive.

Positives of a Tech Recession

Despite some stunning investment losses, I’m enjoying the latest tech recession.

No one likes a recession, but sometimes it’s like spring cleaning, necessary to clear the excess. There were a lot of zombie technologies, zombie companies and zombie assumptions that have been overrun since the Fed decided that money should cost money and there should be less of it around.

Web3, the metaverse, and crypto were all fake from the jump. Advocates for streaming and podcasting didn’t understand that the gating factor is time, not money. A lot of companies were selling themselves based solely on sales growth, ignoring the need for profit.

This means there’s now opportunity, in the form of talent, for new ideas that will power the economy forward. The main trends I described in 2019 – the end of oil, the Machine Internet, and DNA as a Programming Language – they’re still on. But there’s a lot more, too.

The Time Is Now

Here is what 45 years of studying business cycles has taught me.

Now is the time to work on your next great startup.

Right now. When the whole world is collapsing around us. When old business models are failing. When everyone is worried about their job, or about to lose it.

Look at the opportunities. I detailed them three years ago. The end of oil. The machine Internet. DNA as a programming language.

These boil down to renewable energy, control systems, and medicine.

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.

Junk Tech

Imagination is in a constant competition with Moore’s Law.

Imagination often loses.

Moore’s Law makes many things possible. Not all these things are worth doing.

I call things that aren’t worth doing junk tech.

Bitcoin is junk tech. Web3 is junk tech. Blockchain is junk tech. So is the “metaverse,” in the sense that we should all live in a virtual world rather than the real one.

Good applications can come from junk. The home shopping service I supported in 1984 became an Electronic Data Interchange (EDI) format. The map CD-ROM I worked on in 1989 became a format for geographic data. Creating lemonade from lemons is always a great opportunity.