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.
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:
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.
Continue reading "The Three Big Challenges Boiled Into One" »
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.
This is something I saw coming years ago at Investorplace.
Streaming will be owned by the Cloud Czars.
All the entertainment companies with their lawyers, producers, and lobbyists are going to fade away. Together, they’re worth a fraction of what Amazon or Alphabet are. Amazon and Alphabet are, in turn, worth barely half what Apple is.
It’s game over.
The reason is simple. Think of the cloud as the operating system of our time. Control what’s beneath and you control what’s above. IBM understood this in the 1960s. Microsoft understood it better in the 1980s.
A few weeks ago, I noted how the “bad news” at Snap, Twitter and other social media companies can easily be interpreted as good news.. If people are no longer interested in rage tweeting, they could be becoming more thoughtful. They could be reserving judgment. They could have found real lives.
The same is true, doubly so, with the recent “problems” at chip stocks like Nvidia, Micron and Qualcomm. Prices for commodity chips are falling. The “chip shortage” is easing. In the near term it means lower profits for big chip companies. Sell, sell, sell.
But it also means falling prices and more supply for companies that use chips. It means car prices could start declining. It means the Machine Internet can get a fresh start.
It’s said that the rise of remote work will clear out cities.
While it’s true that set projects can be done on set schedules, and that office work can be done anywhere, it’s not true that cities are doomed.
I got a taste of that yesterday.
It was a little thing. A meetup in a bar for biochemistry entrepreneurs, students, and financiers. Maybe 50 people showed up, in 80 degree heat, on a patio near downtown Atlanta. It’s one of dozens of such meetings, in all sorts of disciplines, taking place every month around Atlanta’s science hubs. Money meets ideas informally, and while nothing happens at once a process moves forward.
Today is the calm before an economic storm.
The Federal Reserve is hiking interest rates to slow inflation. Many commodity prices are already coming down. But if it hikes too fast, economic activity will slow and that will be a recession.
To Nouriel Roubini (right), the economist known as “Dr. Doom,” a recession at this time could quickly become a depression, because public debt remains at historically high levels. If you owe $43 trillion at 1%, it costs $430 billion to carry it for a year. At 3%, it’s $1.3 trillion. Your budget just got broken. That’s his reasoning.
But debt owed to yourself isn’t real. We can print that $1.3 trillion. The risk then is that the dollar falls off a cliff. That’s not happening. If anything, the dollar is too strong. We’re importing deflation. Every western nation, and China, has massive debts.
It’s why the doomsayers were wrong in 2009, and again in 2020. It’s why we couldn’t fight the Trump tax cuts. They didn’t create inflation. They didn’t sink the dollar.
A small fall in subscriber numbers sent Netflix stock down 25% overnight in what stock market observers are calling the “streaming crash.”
All the companies involved in streaming crashed in sympathy. Paramount was down 11%. Warner Discovery dropped 5%. Disney was down 4% and even Amazon lost 2%.
As usual I was early to this. I wrote about the streaming crash in 2019. “The limits to the streaming market are time and, to a lesser extent, money,” I wrote. If you were reading closely, you’d know the most important limit is time.
We’re approaching one of the biggest snap back rallies Wall Street has ever seen.
Once Putin’s War is over, everything’s going up. How much depends on the result.
Right now, signs are good. Israel has joined the sanctions regime. China is only going to sell stuff to Putin for cash. But China is in worse trouble than we are. They’re still fighting COVID with lockdowns. Their stock market is a mess. Their property magnates are collapsing. Hong Kong has created a brain drain. Shared prosperity is becoming shared misery. I expect a slow policy readjustment.
Once the war is over inflation will decline. Not magically. Prices are always sticky downward. You don’t cut your price based on costs. You do it when your rival cuts theirs.
Technology remains our best weapon against inflation. My long-term concern remains deflation, and how the gains of technology are apportioned. Fortunately, all those forces who sided with Russia, including our worst oligarchs, are being discredited by events. No one in Washington can see this because they only see today.
Meta Platform (uh, Facebook’s) market cap has dropped 38% since its “disappointing” earnings release. The numbers weren’t all that bad. They make the shares look cheap, a price to earnings ratio under 14.
But before you run to your bookie, Facebook has a bigger problem than metaverse software, Europe’s privacy laws or media schadenfreude.
Its cloud is not set up to do what its software proposes to do. And it seems to be doubling down on that bad design.
I call Facebook a “Cloud Czar” because it has 15 hyperscale data centers around the world. They’re bought with cash flow. Once open, they drop its hardware and scaling costs to near-zero. You can count the companies sharing this advantage on one hand – Apple, Microsoft, Google, and Amazon.
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