Dana Blankenhorn

Democracy's Business Model Problem

When I started as a reporter, 40 years ago, there was a strict separation between “data” and “service.” There was usually just one layer of data.

The service was a phone call. The data was the time, duration and number called. The data was used to generate a bill for service. AT&T still mails customers this data.

There was also another layer of data, hidden beneath the services data, namely the content of the call. This was only available to law enforcement, with a warrant. A number might be tapped or (when technology permitted) a subject might have all the numbers they used tapped. This data was secured. It could only be used in criminal investigations. Civil cases could be tossed if this data were misused.

In print, there were similar splits between service and data. Editorial was the service. Subscriber lists were the data.

Facebook and the Fall of Free

Facebook has no friends.

Mark Zuckerberg thought he had billions of friends. He was wrong.

That’s one of the clear lessons of the Facebook scandal.

The way competitors, celebrities and the media are piling on Facebook is something to behold. I said they were vulnerable to something like this at the start of the month.  I was right.

Facebook is uniquely vulnerable because it has no customers. It doesn’t sell anything to people. Amazon sells stuff to people, and so when Trump goes after Amazon, Jeff Bezos sees his customers defending him. The same thing is true of Apple, which is why Tim Cook didn’t hold back on attacking the heart of the Facebook business model when given the chance on MSNBC.

Microsoft and Google have (so far) kept quiet about Facebook’s troubles, and for the same reason. Both run services supported by advertising. Microsoft has been backing away from this throughout the century (the MS on MSNBC is like the Cheshire Cat’s smile as it disappears). Google has been trying to diversify into products and autonomous cars. But their dependence still exists.

There’s one more important point to make about all this.

The Facebook Scandal

Facebook could disappear. 

This is the difference between Facebook and the other “Cloud Czars,” as I call them. (Picture from the excellent blog of Lisa Vanengen.)

We don’t need Facebook. Not the way we need, in the 21^st century, the information search capability of Google. Or Microsoft’s software. Or Apple’s devices. Or Amazon.Com.

Facebook, by contrast, is entirely optional. Not only is the main service optional, but so are Instagram and Messenger. We can get along very well with Snap and WeChat. The mass move can happen by word of mouse. There is a price below free, and if we don’t want to pay it we don’t have to.

This is something people like Jim Cramer don’t yet understand. This makes what is happening, or not happening, at Facebook different from what happened at Target or even Equifax. Add to that Facebook’s enormous capital budget – it’s putting $1 of every $4 it collected last year into new cloud data centers this year – and you have an existential problem.

Fencing the Internet Content Wilderness

Political leaders have finally recognized something I’ve been saying here for some time.

If the owner of a medium won’t take responsibility for it, someone else will. And they won’t have your interests at heart.

What happened at Facebook was easy to predict. It didn’t take a genius to figure out what was going down, just someone willing to follow the clues. 

The Web made it possible to separate the delivery of information from its value, and we have been running with it for 20 years. This brought us to the era of the Cloud Czars, companies that invested billions in the infrastructure of information delivery and nothing in the information itself.

The Era of Systems

Every decade since I began writing has delivered a new era in technology.

The 1970s was the start of the PC era. The 1980s saw the local networking era. The 1990s saw the rise of the Internet. The 2000s was the decade of mobility. This decade has been that of the cloud.

The 2020s will be the era of systems.

We have been talking around this for years. We talk about the Internet of Things. We talk about artificial intelligence, adding it to the cloud to create FOG computing. We talk about blockchain.

We talk about these technologies as silos, but that’s not the way technology works. As I have been writing since publishing Moore’s Lore  in 2001, the exponential improvements driven by chips go into many directions. They pile atop one another, they reinforce one another like electric waves.

PCs combined chips with a user interface. Local Area Networks combined PCs with techniques derived from telephony. The Internet takes these LAN techniques global. Mobility again combined chips with new user interfaces, eliminating peripherals. The cloud era is built on open source software, standardized chips, and the same networking used in the Internet.

On Net Neutrality

If you have been reading this blog for any length of time, you no doubt believe that I’m a radical. A liberal. A fanatical criminal. 

In some ways this is true. On foreign policy I’m an internationalist who believes in peace. On social policy I believe people should be free to love who and what they want, and to kill themselves in any way that suits them.

This is not true in economic policy. I still consider myself a liberal here, but business was always a liberal force before the Nixon era. Progress is a business word, still often used in advertisements to denote the aims of oil companies and manufacturers, as well as tech outfits.

My economic beliefs are based on those of Adam Smith, who saw wealth inclining the wealthy toward the common good. I consider Trump and his acolytes to be Nietzscheites. (Ayn Rand is just Nietzsche in a skirt.)

More to the point, I consider them Fascists, and resent that I can’t use the word in public without being condemned.

So, when it comes to the subject of net neutrality, I’m sure you’re thinking, Dana is going to tell us that the FCC is wrong, that Democrats are right.

I’m not.

Beating Fascism in Our Time

Before this era is over there will be a global demand to “eat the rich,” at which point the Kochs, the Mercers, the little Trumps and Peter Thiel expect this nation’s intellectuals to save them from the guillotine.

The rich do have their purpose. Wealthy people supply capital for opportunities that create jobs. They stand by the banks that provide liquidity to the system. But they were amply paid for these services before they launched all-out war on the poor (and middle class), starting with Nixon, accelerating with Reagan, becoming obvious under Bush and climaxing under Trump. 

At Christmas 2017, the day of victory over these forces seems far off. The rich and their castles of money seem as impregnable as the castles of stone were for their 14^th century forebears. Everywhere you look, it seems, fascism reigns supreme. Russia has taken down America, China is “communist” only in name, the Middle East is ruled by the Saud Kings, and throughout the developing world absolute rulers of all stripes know the great powers have their back.

The world is much like it was in 1942, except that democracy and capitalism are being squeezed from above, not from the sides.

But victory is in sight.

How the Web Killed the Media

The great tragedy of our time, the tragedy that led to Trump, is content’s loss of control over its own business models.

When I began writing the weekly newsletter that became this blog, 20 years ago, the threat of this loss was a primary theme. I asked newspapers and magazines “how hungry are you?” suggesting that if they turned advertisers into business partners, and earned commissions on sales, they could prosper on this medium.

Advertising is just a means to an end. Newspapers sell space for ads, and ads start readers down a sales funnel. Sales are what the buyers of advertisements want. If online publishers could deliver sales, I thought, they would earn all their business partners’ marketing budget.

I saw even then how the Internet could deliver a store’s entire experience, from advertising, through marketing and sales, through the transaction to service and support. It was the publishing opportunity of a lifetime.

No One Took It

Monopoly, Market Advantage, and Mouthpieces

The long-running scam on which this blog was originally based was the AT&T monopoly.

Since the 1984 Bell break-up, AT&T has been recreating itself, like the brooms of the Sorcerer’s Apprentice sequence in Fantasia. What were originally 7 regional Bell companies merged into 2 regional Bells, then those two bought the long-distance operators with big market share in the Internet core. AT&T is descended from Southwestern Bell, one of the original 7, and changed names when it bought the long-distance operation.

AT&T has spent most of its corporate life grifting off government. It won huge subsidies to create “universal service” over a century ago, and it eventually won the end of price regulation on the service. It continued its grifting on the Internet. A “universal service fund,” derided as a “Gore Tax” by opponents, was a subsidy, crafted mainly for AT&T, aimed at delivering broadband service to rural areas and urban ghettoes.

Amazon.Com vs. Trumpistan

Given that this past week was Prime Day, it’s worth noting that if there is one company to blame for the troubles of Trumpistan, it’s Amazon.Com.

Amazon is behind all the trends that are destroying the lives of Trumpistanis, before their very eyes.

The Amazon cloud, sold as Amazon Web Services, powered the app trend that destroyed the jobs of suburban gatekeepers, the insurance agents and real estate agents, the travel agents and editors who are now apps. This took the leadership out of many suburbs, as effectively as a decapitation.

Amazon’s store, and its marketplace, have since destroyed retailing. This was another big source of suburban jobs.