Dana Blankenhorn

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 Next Crash Will Be a Private Equity Crash

There is always a next crash.

The problem is we never know when it might happen, or what might trigger it.

I can’t answer the first question, but I can answer the second.

It will be private equity.

Private equity has been taking over the world for the last 40 years. It arbitrates against financial regulations by design. The idea is that people who invest in such a fund are guilty of wealth and, thus, can afford to take a loss.

But are they? Any loss, taken in any market, results in some panic selling. We see it in every crash.

The problem is that there’s now more private equity running around than public equity. The canary in that coal mine is the banking business.

Private lending has exploded in recent years. This is a $1.5 trillion business that’s crowding out banks. This was a $1 trillion business just two years ago. It’s growing that fast.

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.

Speaking of Sports

The most interesting economic story right now, verging on the political, involves sports.

Two business models are colliding.

The European business model is built on the club. Clubs organize into leagues, but government interference or subsidy is prohibited. The result is capitalism red in tooth and claw. There are haves, and there are have-nots. But there is some social mobility. A bad club loses money when it drops down the national pyramid. A good club can make money as it rises.

The American model is based on the franchise. Leagues control franchises, much like McDonald’s controls its franchisees. Government subsidy is actively encouraged. Most college teams are controlled by state governments.

E-Books are Better

This is a take that’s going to be surprisingly unpopular, despite being obvious.

E-books are better than paper books.

They cost nothing to deliver. They’re cheaper than paper books. They don’t kill trees. They’re lighter and easier to read.

They can also be updated, and that’s important.

I got a call recently from a company wanting to reprint my 2001 book on tech history, which I called (unfortunately) The Blankenhorn Effect. I later re-issued it twice, each time under a different title, as I came to understand that tech changes too fast for books to keep up with. My next project will be another update, tentatively titled Moore’s Lore 2024: More After Moore.

What’s the advantage of a paper book? It’s permanent. Its sale process offers serendipity. There’s nothing like the smell and feel of a bookshop, or a library. You can make the same arguments for LPs over a streaming service.

There’s one more argument that book lovers use. They hate Amazon.Com.

I get it. Amazon, and its Kindle, rule the e-book market. It’s the format of choice. It holds a market monopoly. This has made Amazon lazy. The whole Kindle business is now a pimple on the butt of Amazon.Com, which was founded almost 30 years ago to sell paper books.

Biden’s Plan Worked. Get Over It

Business reporting should be about telling people what they need to know, not what they want to know.

That’s not businesses are buying. Sad. It’s not what they’re getting, either.

Too many businessmen only want their egos massaged, and their political inclinations confirmed. This is true when it comes to reporting, my own field, where we have Forbes, Fortune, Business Insider, and a host of other Republican-leaning publishers spinning the news. It’s doubly true for CNN and CNBC. The latter has an on-staff “wealth reporter” specifically hired to fluff the egos of his betters.  

Sadly, it’s also true for economists, those “experts” hired by big banks and brokerages to figure out where things are headed.

Over the last month I’ve been treated on TV to a parade of so-called financial experts, each one confidently predicting that a recession is imminent, that it’s baked in, that it will likely be severe. These jamokes have insisted this will end the drive for working from home, that it will end demands for higher pay, that it will bring employees crawling on their knees to their bosses for a crust of bread, a revived dress code, and a two-hour daily commute.

It was all bullshit. It was spin. It was politics. It was telling people what they wanted to hear.

The evidence is in. GDP grew 2.4% in the last quarter. The economy isn’t slowing. It’s speeding up.

Want to know why? I’ll tell you.

How Long Can Economists Be Wrong?

The truth about macro-economic prediction is this.

No one knows anything.

Empirical macroeconomics is in its infancy. The first macro book based on real data I can recall is Thomas Piketty’s Capitalism in the 21^st Century. Because the author’s conclusions were considered liberal, it was largely ignored.

Economics since Adam Smith has mostly been witchcraft. It has been based on feelings, on assumptions, in short on ideology. Economists have decided this is the way it must be because their bosses say so, then they twist reality to fit the theory. The assumption is that when prices rise, suffering must follow. The only way to get good times is by giving people hard times. (Not economists, of course. Never economists. Little people, working people, poor people. Other people.)

Most of what we “know” about how economic systems work is bunk. Capitalism only works in practice, as billions of people buy, sell, make, and trade with each other. But practice offers nothing to moralists.

Most economists are politicians, or if not they work for them. And almost all politicians are moralists of one sort or another.

This divergence has become both obvious and obnoxious. Countless economists keep predicting an imminent recession. Some think it will be very bad. Reality refuses to cooperate.

The Federal Reserve says it is “data dependent,” and the data it’s looking at is prices. Those prices are increasing, but at slow and slower rates. The economy, meanwhile, keeps rocketing along. Why?

Manhood vs. Brohood

I don’t pretend to be a great man. I’m barely average. I try to get better. I try to overcome an upbringing of white privilege, in the Long Island suburb of Massapequa, where I lived until I was 18.

My father passed away in 1999. He could be sexist, racist, and misogynistic. He could also be wildly creative, imaginative, and a great salesman. When he got very drunk (he was a WWII veteran) he’d call himself a “true Aryan.” But he did the best he could. He ran Tower TV, the local TV repair shop, then got into security and locksmithing after moving to California. All four of his kids wound up solidly in the American middle class. His younger son (not me) taught calculus to generations in Los Angeles public schools.

It wasn’t until I moved to Atlanta that I found true manhood. I found it in our “block club,” a group of families on our street who met monthly to exchange news and advocate for services.

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.