Dana Blankenhorn

Fire Sundar Pichai

Recessions are good for markets.

They show us where the rot is, where the poor performers are.

This current one is no exception. It revealed that some of our Cloud Czars, the companies dominating the global economy with hyperscale datacenters paid for with cash flow, aren’t as clothed in gold as they seem. Some are downright naked.

Early this month, I identified one source of rot and urged Jeff Bezos to fire Amazon.Com CEO Andy Jassy. But it’s also time for two other founders to get back in the game. Larry Page and Sergey Brin need to push out Sundar Pichai.

Pichai is the kind of numbers-oriented manager Wall Street loves, but Silicon Valley should despise. He’s the kind of go along, get along guy who can make the trains run on time, but completely lacks vision. In technology this is a fatal flaw.

It’s obvious in how he dealt with artificial intelligence, the new hotness of 2023.

This is not about firing an ethicist. It’s a more basic failure to see where things were going, and deploy the necessary resources to get there. 

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.

Facebook’s Bigger Problem

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.

Controlling Data for Good

When we talk about control over data, we start with metadata. These are vast stores of data on what people are searching for online, data about data.

Google and Meta Platforms (Facebook) use metadata to control advertising. Metadata lets advertisers reach specific consumers for the same price as the general network. The aggregation and organization of markets, once done through journalism, no longer pays.

The same techniques, applied to content, led us to Trump. Victims stay within a walled garden of propaganda. Facts can never get in. People don’t just vote based on this. They refuse vaccines, buy guns, and die. He who controls the data makes the rules.

Democracy Dies Behind a Paywall

 

I saw a tweet last week that got my blood boiling.

It was from a Washington Post columnist to the effect that people should have to pay for news. Paywalls are necessary for the news to exist.

They’re not.

Before the Web was spun, people did pay for newspapers. But the money only covered the cost of distributing the paper. A generation ago you could also buy a bundle of news daily. Today the Post requires a subscription, a monthly or annual fee. Not everyone can afford it. Even for wealthy people, news they don’t pay for doesn’t exist.

Paywalls can be useful. They allow targeting. A paper focused on the entertainment industry only wants people in that industry reading it. Any circulation outside that is wasted. A paywall maintains circulation quality, thus ad rates.

For a broad based news outlet, it’s the opposite. You write for your readers. If all your readers are upper middle-class, that’s who you write for. You may write about the poor but it’s always from the point of view of the wealthy.

What If Steve Jobs Were Evil?

If Steve Jobs were evil, he would be Mark Zuckerberg.

Zuckerberg was born in 1984, the year the Apple Macintosh was introduced. He founded Facebook in 2004. He launched Facebook’s program to build cloud data centers in 2011. His fortune was estimated October 5 at $117 billion, but that underestimates him. That’s because he controls the voting stock of Facebook, now worth $913 billion, so his power is greater than his money.

Facebook isn’t its eponymous service. It’s not Instagram. It’s not WhatsApp. Facebook is its 16 data centers, the thousands of miles of fiber cables connecting them with local centers, and with the world. About 1.6 billion people use Facebook services every day, according to its most recent quarterly report. Americans can take or leave Facebook, but people in the “Global South” depend upon it.

Pay for the Clouds

Right now, the roughly $150 billion/year going into cloud infrastructure is paid for with cash flow. Most of that cash flow comes from free services.

It’s ad-supported services that are holding up the free Internet. It’s these ad-supported services that the clouds were first built to support.

The antitrust bills now zipping along in Congress try to end all the perceived “sins” of the Cloud Czars – Apple, Microsoft, Amazon, Google and Facebook. But they don’t answer the big question, which is where new cloud investment will come from if the Czars are broken up.

Amazon can do fine on its own. There is plenty of cash flow coming into Amazon Web Services to support its capital spending. Most of Amazon’s investment these days, in fact, is going into warehouses and transport fleets, which aren’t as profitable. Splitting AWS from Amazon, along with its digital services like Amazon Prime video, the Kindle eBooks, and Alexa cloud-based speaker, would be a stupendous opportunity for investors. It would let AWS grab share from Google and Microsoft because their clouds are tied to software that competes with their customers.

The Rise of the Rest

Throughout the Trump years, former AOL CEO Steve Case wandered the country, promoting the “Rise of the Rest.” 

The idea was that you didn’t have to be in California to be in tech. You could do it from anywhere.

Not news to me. I’ve been covering the technology industry since 1982, from Atlanta. My wife has been working in it since 1983.

But for decades Techlandia represented just a few places. Like San Francisco, Seattle, Boston and Washington, D.C. Yet it exists everywhere. Always has.

The pandemic has altered the rules and thus accelerated the change. While the money for tech still comes from Silicon Valley and New York, workers and start-ups can be found everywhere. 

Free TV is an Invisible Scandal

When TV was made digital to free up spectrum  stations were given “extra” channels in the new bandwidth, to do with as they wanted.

Something similar happened in the 1940s, and it made many fortunes. Big radio stations in major markets were literally handed new TV stations. If they also owned newspapers the bonanza was doubled. This was the foundation of Cox Enterprises, originally a newspaper chain founded by failed 1920 Presidential candidate James M. Cox.

The current transition is making no billionaires. In fact, it’s a scandal. A scandal no one is talking about.

Before the transition there was lots of talk about TV stations creating multiple channels with their new spectrum rights – news channels, cultural channels, ethnic channels. Instead, these rights have been sold or rented to a host of ad-based garbage programmers. Most stations just took the money and ran.

In Atlanta, for instance, there are channels running 1950s re-runs, a bunch of home shopping channels, foreign language channels, religious channels, even foreign channels. These are the kinds of channels that are too worthless to make it onto cable. There are also a lot of empty channels, or channels running the equivalent of radio. If you only have access to “free” TV (through a special antenna and, perhaps, a set-top box) you’ve been ripped-off. It’s not worth what you paid for the antenna.

The frequency spectrum is not supposed to be property. It’s not supposed to be a private slum. It’s supposed to be a public good. That was the idea of the Radio Act of 1926, and the Federal Communications Act that followed it. But this concept has been lost in our time.

If you want to make some meaningful change, demand we go back to that.

Facebook vs. Apple

It’s not as black and white as you think.

To hear the tech press tell the story, Facebook is promoting evil by admitting to its ad tracking and asking users to opt-in. Apple, meanwhile, is on the side of the angels by loudly promoting privacy.

But here’s the deal. Facebook services are free. Apple services are not.

The tech media is cheering for the global elite against the global poor.

The free web has been the greatest wealth production effort in history. Over the last 20 years over 1 billion people, a substantial portion of the world’s population, has been lifted out of extreme poverty by the free web. The freedom of the web, free as in beer, has been driven by the cloud, which pushed costs low enough that they could be supported by advertising.