Dana Blankenhorn

The Gating Factor

Why will liberals win in 2020, why should they win, and why should businesses applaud?

It has to do with the gating factor. 

The gating factor is whatever is limiting something. In an Internet session, it’s the speed of the slowest connection between server and client. This is true on a micro level as well. Chip companies put memory on-chips because the speed of data movement into processing is the gating factor. 

In an economy, the gating factor changes, usually every generation. In the early days of the Republic, the gating factor was labor. That’s why owning slaves made economic sense for Washington, Jefferson, and Madison. Then the gating factor became transportation, and then capital had to be organized. When manufacturing dominated, demand was the gating factor. Failure to grow demand by expanding the money supply caused the Great Depression.

In my generation, resources were the gating factor to growth. It made sense to invest in troops and military hardware who could control vital resources like oil.

In today’s technology economy, the gating factor is brains. Not just people, but smart, motivated, empowered people.

We’re just starting to understand what this means in terms of economic policy.

The Avalanche

Between the Iowa caucus debacle and the rocketing stock market, a lot of Democrats spent the first week of February in a very depressed mood.

Rising stock prices, and low unemployment, have the Trump approval rating as close to 50 as it can get. He is certain to be even more unhinged, and unbound, by the Republican Senate’s refusal to even censure him for his theft so far.

Lincoln said it best. “The hen is the wisest of all the animal creation, because she never cackles until the egg is laid.” 

The tide is still running out on Trumpism. Demographically, it stands no chance. In terms of issues, the same. It’s only the market that’s with him. That, too, may be about to change.

That’s because the stock market, like the housing market, is made up of assets.

The Big Secret of 2020

The stock market is not the economy.

The fall of Trump is secure because of that.

Trump has long confused the health of the stock market with the economy. But 84% of stock is held by people in the top 10% of income. The bottom 80% own just 6.7% of shares. 

Whether it’s true or not that most Americans own some stock, as the nit-pickers at Politifact want you to believe, the fact is that prosperity is going to fewer-and-fewer people. (Thanks to two careers in tech, some of it is flowing to me.)

This trend has accelerated during the Trump time. Among the hottest stocks today are companies that cater to the needs of poor people. Dollar General is up from $60 to $160 since Trump’s election. A former Dollar General CEO, David Perdue, is a Senator from Georgia as a result. The other Georgia seat is held by Kerry Loeffler, whose husband runs Intercontinental Exchange, Atlanta-based owners of the New York Stock Exchange.

You may think Trump’s base consists of racists and mullahs, but it’s really moolah. A Goldman Sachs client survey shows 87% expect Trump to be re-elected. Hedge fund billionaires love this market, and they love Trump, even though they know his pumping of stock prices must end. 

I’m one of very few reporters working today who was doing this job in 1980. I’m on the same business beat I was on then. I was also politically active in 1980.

Dorsey of Africa

Everyone’s scared of China. Everyone thinks China is about to take over the world.

It’s not.

China is aging faster than we are. China’s authoritarian rulers stop new ideas from developing. They’re wasting just as much money, and potential, in Xinjiang and Hong Kong as we are with our Gulag and border wall.

In an age where human capital is the gating factor to economic growth, there is only one name for young men and women to know.

Africa.

This is not just about Twitter and Square CEO Jack Dorsey’s plans to spend half his time there next year. It’s about what is there whether he’s there or not.

Truth

Since finishing my book on Moore’s Law (for delivery on the Amazon Kindle after Thanksgiving), I’ve begun a new project.

It’s called 1933. (This is not it. It's a history by Philip Metcalfe I've been using in my research.)

It’s an alternate history novel. It’s based on the idea that FDR, and the people around him, understood the threat of Hitler from the start and acted against it.

That era had a lot in common with our own. Manufacturing was acting on the economy as Moore’s Law is acting on ours. Efficiency created more supply than bankers could create demand for. A few wealthy men presided over a society of millions of fearful people who couldn’t keep up with the pace of change.

The most charitable thing I can say about Donald Trump is that he wants to make Warren G. Harding great again. His policies are identical. Fealty to Wall Street, corruption, laziness, isolationism. He even uses the phrase Harding used to describe this – America First. Democrats, by contrast, have a Harry Truman view. They have learned from the Hitler era, and the long Cold War following it, about concepts like collective security. From 1947-1990, we used all our strengths, overt and covert military action, but also the “soft power” of diplomacy, our economy, technology, and liberty, to take down the Russians. Moore’s Law, and everything that came with it, began as a Cold War activity.

Now Trump’s throwing all of that on the fire.

It’s almost impossible to conceive a world where World War II did not happen. But it began quite suddenly. Hitler gained power as Chancellor in late 1932. By the middle of 1933 democracy had been dismantled, Jews were being brutalized, the first concentration camps were being built. Hitler, and his henchmen, were completely transparent about their aims. They accomplished those aims, and this led Germany down the road toward its complete destruction.

The 2020s: A Future in Three Parts

Moore’s Law accelerates change. Aging accelerates time.

Hard as it may be for me to believe, the 2010s will be over in less than 5 months.

In technology the last decade has been a Golden Age for clouds and devices. So, too, in business and in politics. The refusal of cloud companies to lock-down their technology elected Donald Trump. The result has been a march toward civil war, global war, trade war, the biggest crisis since the late 1960s.

But you ain’t seen nothing yet.

Moore’s Law of Health means I may live much longer than my parents did, long after history should have rolled over me. At least that’s true in those places where people can afford medical care. The likeliest replacements for Donald Trump are both older than he is. Al Gore is younger than either Joe Biden or Bernie Sanders. We’re still debating Woodstock, 50 years on.

We’re going to start turning the page on the current era in 2020. The hold of the autocrats is weakening. It’s weakening in Russia. It’s weakening in China. It’s weakening in Texas.

Moore’s Law continues marching onward, better and better, faster and faster, reaching further and further afield.

In this decade it has made Africa accessible to global markets, made India as well as China an economic power. Over 1 billion people have entered the middle class this century – they have homes, some material comforts, and they have hope.

What might the next decade bring? If I make it to the end of this decade, I’ll be 75, so this may be my last shot at predicting the future.

But here goes.

The Twilight of Nationalism

If mankind still exists in 2119 their historians will write about this era as the Twilight of Nationalism.

Nationalism was essential when economies were based on resources, machines or muscle. In the era of clouds and devices it’s increasingly irrelevant. The global nature of our existential crisis makes nationalism an outright impediment to the survival of mankind.

Thus, it’s no coincidence that nationalism has been a rising force in the decade now ending. Just as it concentrates the mind to know you’re to be executed in the morning, so it is for leaders and political movements. Seeing sunset in the distance you do what you can and ignore the consequences you know are coming.

The Trump election acts as a midpoint and permission slip for all this. Nationalism was already on the march, in Europe, in the Middle East, and in Asia, through the agency of Russia, when Trump came to office. But Trump has given nationalistic impulses around the world permission to act. There is no American opposition to ultra-nationalism anywhere, no alliance worth protecting, no counter example to follow.

Thus, nations push their boundaries outward, fearing any force that might threaten their power, and ignoring the natural internationalism essential to economic growth and climate action.

That’s why Brazil is going after its rain forest. That’s why India is going after Kashmir. It is why China is going after Hong Kong. That’s why England wants to detach from Europe, why Eretz Israel is a thing, why Saudi Arabia seeks dominion over its whole peninsula. If you can afford it, nationalists think, seize the day. The window is closing.

Fall of the House of Oil

There is no energy shortage. The sun shines. The wind blows. The tides roll. We live on a molten rock.

At the start of this decade, when I first began covering the War Against Oil, and changed the sub-head of this blog to reflect that, I believed the key to victory was bringing enough investment to the space, public and private, so that the cost of renewable energy would fall below that of fossil fuels.

It’s happened.

Crossover happened just as I expected, in 2016. The cost of energy from solar panels is now lower than that from burning coal. The cost of energy from windmills is now falling below that of burning natural gas.

The only thing keeping fossil fuels alive in the big utility model is the sunk cost of infrastructure. When that proves unreliable, as it did in Puerto Rico a few years ago, it’s replaced by solar power, batteries, and micro-grid technology, just as Al Gore predicted two decades ago. 

Making Local News Great Again

A quarter-century ago, when the Web was being spun, I asked local newspapers how hungry they were to sit at the Internet’s banquet.

They weren’t hungry at all.

They took none of my ideas. They laughed at me as an outsider (I was writing online even then) and thought they could “repurpose” their existing print effort to win the online game.

Frankly they deserved what they got. When I read whinging about how local newspapers are failing, or being taken over by politicians for propaganda purposes, I have no sympathy. While I’m a journalist, I was trained as a business journalist, and I have always seen journalism itself as a business.

Human Capital and the 1980 Game

In 2020, we will be 12 years removed from the first political triumph of technology, the generational election of Barack Obama. All his progress is now being undone, much as a generation ago oil’s gains were threatened by Jimmy Carter and his cardigan sweater.

As we prepare to play the 1980 Game the question becomes, who is Ronald Reagan now? (It’s usually phrased, “Who Can Beat Trump?”) The answer lies in what drives our economy today, and in what drove it then.

I remain confident in the ultimate triumph of Democracy because, today, human capital is the gating factor to economic growth.