Dana Blankenhorn

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.

Where Elizabeth Warren is Wrong

Like a lot of people, I admire Sen. Elizabeth Warren of Massachusetts, or as the great Charlie Pierce calls her Senator Professor Warren (SPW).

But, again like most people, I can’t vote for her for President.

The reason, in my case, is Warren’s attitude to the Cloud Czars. Warren is staking a big part of her candidacy on running against them.

Let’s set aside, for a moment, the fact that the Czars – Microsoft, Apple, Amazon, Google and Facebook – now command a combined market cap of nearly $4.5 TRILLION. Never mind that they dominate the business world, or that democracy always follows the Golden Rule – he who has the gold makes the rules. Democrats aren’t going to win the White House over the objection of the Czars and the bulk of the technology industry.

My beef here has to do with her proposal to break up the Czars, starting with Amazon.

Her argument against Amazon is that the company can see which brands people are buying, then put an Amazon version into the market and wipe out the other seller. It’s like she never heard of store brands.

Store brands have been a feature of American retailing practically since brands. Kroger does it with food. Target does it with clothes. Walmart does it with both. Walmart calls their store brands “Great Value.”

Copyright Wars 2020

My #1 life goal is to be plagiarized. THERE IS NO GREATER ACHIEVEMENT OR HONOR.

                                                                                ---Tom Peters 

                I first wrote about the Copyright Wars in 1997, when the Digital Millennium Copyright Act was being debated.

                I predicted, in my first version of Moore’s Lore, which came out in the year 2001, that “East Coast” laws like this would fall to the “West Coast Law” of code.

                This is not the way things are working out in 2019. The Internet’s ability to serve mankind is threatened as a result.

                As Tom Peters notes, there is no real value in an idea. An idea is only worthwhile if spreads, or if it’s acted upon. For this to happen it must be communicated, disseminated, and digested by many other people.

                The Internet, specifically the World Wide Web, is the means by which this now happens. The Internet lets any idea, from anyone, reach an audience and change people. Or not.

                But two things are happening. First, bad ideas are getting the same power to change people as good ideas, because no one can credibly tell everyone the difference. Second, the copyright industries have moved to stop the distribution of ideas, under the mistaken belief that there is value in them, and that anyone repeating them should pay.

                Trump illustrates the first point well, although anti-vaxxers and other idiocies would exist even without him. It’s in the nature of the Internet to eliminate gatekeepers, and those companies that have risen to that position, like Facebook, Google and Twitter, eschew the role, fearing it will let government prevent protest (which it can).

Aladdin’s Bank

Jeff Bezos doesn’t really have over $100 billion, not in the way you may have $1,000 in a bank. Amazon.com isn’t worth $900 billion, in the way your house is worth $250,000.

Both valuations are based on a lie, the idea that Bezos could sell out his stock, or that ready buyers would take out all shareholders at the current valuation. The value of a stock-based fortune, or a company’s market cap, is based on the price paid at the last trade.

So it is that we return to Aladdin’s Cave, which I wrote about in 2013.

Had Aladdin come out of that mythical cave, with all its gold and jewels, and tried to sell them, the value of gold and jewels in that town would have plummeted. He would have brought only a fraction of the value.

On the other hand, what if Aladdin were a Hamiltonian?

The Crash of 2019

Right now, in early April of 2019, the U.S. economy seems to be in great shape.

Inflation is minimal. Money is cheap. Unemployment is down. Wages are rising.

Here is why I think this is all going to collapse, and that right soon.

Deflation.

As I have said here many times, technology creates deflation. Deflation is the primary subject of my Moore’s Law book, which I’m getting ready to rewrite for 2020.

To understand deflation in action, look in your hand.

Technology’s Dilemma

There is a bug at the heart of innovation, of technology, and of capitalism itself.

It lies in the incentives we give innovators.

It lies in stock ownership.

What liberals have condemned is the fact that nearly all the profit from innovation is going to a very small number of people. The winners’ founders, and their venture capital partners, get fortunes measured in the billions of dollars. Their key people also wind up as multi-millionaires. Everyone else, whether they’re line staff or just ordinary schmoes, can pound sand.

Sure, we all get some of the benefits. It’s cool to have cat litter delivered. It’s amazing that I can learn anything I want to know within moments. I can call my kid in Europe free. The software and hardware my son accesses, to automate cutting-edge medical tests is amazing. As a result, we’re starting to understand not only the genetic code, but what lies beneath it.

Still it’s true. The rewards are all going to a very small number of people. Jeff Bezos will never be able to spend the $150 billion he has access to. Bill Gates will never be able to give away the fortune he has won. Philanthropists are taking on the role of governments, self-appointed boards deciding the priorities on the nation’s wealth.

World War III, The Internet War

World War III is an Internet war. It has been ongoing for over a decade.

When the conflict was between countries like Pakistan and Ireland, or Ukraine and Russia, we could afford to ignore it.

Then it came to our own shores. November 8, 2016 was this war’s Pearl Harbor.

Yet we still haven’t reacted, because once the enemy is in the tent the media thinks going after them is friendly fire.

There’s nothing friendly about it.

Sure, there are efforts underway at Google and Facebook to boost “real news” and dissuade “fake news.” Yes, there are efforts underway in Congress to control online political spending. Yes, there is the Mueller probe.

But these are nothing. We still see the Internet War as something we can stop with higher firewalls, or bigger budgets.

We can’t.

The 1979 Game

When you win the popular vote by 9.5% but still lose ground, as Democrats did November 6, your problems are systemic.

The result underlies tech’s obligation to come out of its shell and fight for the political system that birthed it.

Tech moguls have done some things. Jeff Bezos bought The Washington Post, Marc Benioff bought Time Magazine, Laurene Powell Jobs bought The Atlantic. The key to gaining more power will be in creating journalism business models beholden to tech interests.

Tech must do to Bizarro Carter what oil did to Jimmy Carter, and for the same reason -- to protect its self-interest.

Trump’s War

I’ve been guilty of this myself.

I’ve said that George W. Bush had to have been a worse President than Donald Trump because he lied us into war and Trump didn’t.

Well, Trump did. Trump has. Trump has unilaterally declared a trade war, based on nonsense, and a lot of people are going to be hurt by it.

And it’s all based on lies. (Sculpture by Kimber Fiebiger.)

First. A trade deficit isn’t money you have to borrow. It lowers your cost of goods sold. It’s deflationary and allows you to sell finished products for less than before. It makes the whole global economy more productive and efficient. This idea that we “owe” China for its trade surpluses is, simply, a lie.

Second. Trump is going to war on behalf of industries that deserve to fail. Coal hasn’t been a growth driver since the 19^th century. Steel hasn’t been vital since World War II. Supporting failing industries is bad industrial policy.

Third. Trump is going after China in precisely the wrong way. If he did want to hurt China economically, he would open the H-1B visa floodgates and encourage every Chinese student coming here to remain. What drives economic growth in the 21^st century, as I’ve said many times, is human capital, trained and willing minds. Freedom is our trump card in any conflict with China. Sending them down the demographic cliff while we stay above it, remaining youthful by bringing in the world’s best and brightest, is the only way we’re going to stay in the economic game.

The Eye of the Hurricane

The 1978 election, my natural analog for 2018 based strictly on economic history, was not a great one for Republicans.

True, they won 15 House seats and two in the Senate. But Democrats retained control of Congress, both houses.

If history were to repeat itself in 2018, this would give Democrats the Senate and keep the House in Republican hands. History rhymes, it doesn’t repeat.

Jimmy Carter was very popular at this point in his term, in the wake of the Camp David accords. His approval rating was 56%. The fact that Republicans won in 1978 despite this shows their issues had saliency. The Wikipedia entry on the election notes that it set the stage for the Reagan Revolution, and that the Republicans who won were far more conservative than those they replaced.