Dana Blankenhorn

On Merit

What tripped up the technology industry in 2016, more than anything else, was the question of merit.

Technology is a meritocracy. We want the brightest, most engaged, most passionate minds we can get, and we don’t care where they come from, what sex or race they are, or who they love.

But for those who fail the meritocracy test, and it’s assumed that will be most people, tech today has nothing for you. This, is why technology lost the election. People who work with their hands, people who don’t go to prestige colleges, feel locked-out of the game, except as drudges. They took their revenge in November.

The problem is made worse by the behavior of the elite institutions. Increasingly top colleges are taking students from overseas. They’re taking the elite from China, charging them full freight, and they know the kids can do the work.

Put those two things together and you get Trumpistan’s nightmare. Their kids can’t get into the game, and all the money from that game is funneling into fewer-and-fewer hands. The assumption is that technology, which cut out middlemen, then salesmen and retail clerks, is now coming for anyone who drives. What are their kids going to do?

It’s enough to make you a Luddite.

Biology is The Next Wave

The next few years will see technology, the industrial wave of the present, fighting to take back power (permanently) from the resource industries which seized it in 2016.

Technology will succeed. The future can’t be put back into the bottle. If it can’t succeed here, it will go elsewhere, leaving America to become just another Latin American dictatorship.

But there’s another wave following technology. Just as technology followed resources, resources followed manufacturing, and manufacturing followed utilities, railroads, and agriculture to the center of the U.S. economy, and thus its politics, so biology is following technology.

The Political Power of Human Capital

In the 21^st century there is no capital so important as human capital.

High-quality human capital consists of people who are educated, educable, and who are excited about what they are doing. They’re golden threads in the haystack of humanity. Put them together with a supportive environment and you get growth.

Since computing was invented the United States has been the leader in human capital. We attract it, we train it, and we deploy it better than anyone else.

Increase the percentage of high-quality human capital you have, in relation to the other kind, and your society can grow very quickly. Think Singapore or Hong Kong. Think Israel or great cities like London. If your cities or nation is a magnet for human capital, what Richard Florida called “the creative class,” wealth will be yours.

The Google Content Fund

It’s ironic that a company founded in Atlanta wound up breaking journalism.

Doubleclick was launched in early 1995, in Atlanta, but moved to New York shortly thereafter. It was bought by Google a decade later.

Doubleclick sold ads based on intrinsic targeting. The system used cookies to learn things about you, then buyers took out ads aimed directly at what you were doing. This led to things like a mother being offered cookie recipes at a gun site, or a gun owner being shown a magnum when he’s looking into champagne vacations.

These kinds of ads are intrusive. They invite blocking. They’re irrelevant to where your head is right now and their performance is thus very, very poor. But this doesn’t matter to an advertiser who can buy 100 such ads for what a specific web site on, say, guns might ask for a single impression. They get it back on volume.

Educating Trumpistan

On most issues the politicians representing TechLand are right and those of Trumpistan are simply wrong.

It’s not that Trumpistan lacks answers. The trouble is they don’t know the questions. Trumpistanis believe a politics of nativism, populism, and militarism can save them from the forces of change battering down their suburban splendor. They can’t, because politics had nothing to do with it. What is happening is that the same technological forces that built those suburbs now demand new economic structures, built around software and research, and the need for trained minds to be in constant contact, 24-7 rather than 9-5.

Bankers and insurance agents, the middlemen who held the country together through the 20^th century, are no longer needed in the 21^st. They’re like John Henry, the steel-driving man. They’re coal miners, they’re auto workers, they’re ditch diggers, they are in the way, and they are being replaced by machines.

Life After Trump

Donald Trump is not going to become President.

America has not surrendered to tyrants, or would-be tyrants, for 225 years. We are not about to start now. There aren’t enough angry white men in the world to elect him.

The question is what happens to the anger that he generated? We have several examples of that in American history, and none should leave you sanguine.

The most peaceful outcome was what happened in the last turn of the cycle, from manufacturing to oil. War in the 1970s became our chief economic export, but it was at least kept far away. The domestic objections, the anti-war crowd, generally left politics after 1972, gradually accepting their role in opposition, suffering the “hippie punching” that distinguished our politics right until the next crisis, in 2008.

World War II followed the 1932 crisis, beginning first in China, then erupting in Spain, before engulfing the world. World War I came in the wake of the 1896 crisis, preceded by a decade of American imperialism, while Filipinos died, Columbians saw their country broken, and Theodore Roosevelt became the first great avatar of American imperialism.

Also, the Civil War, which began right after the 1860 election.

Techland vs. Trumpistan

In 2016, the political divide and economic divide in America are the same thing.

I live in Techland, and have lived here most of my life. I am a modest citizen in the place, but to other Americans I’m doing quite well.

I have watched technology roll over the industrial economy, and now the suburban economy, like an invasive species. Technology destroys long-standing power relationships. It eliminates friction in the economy, and that’s a good thing, but in doing that it eliminates the jobs, and power, of the people who created the friction.

Those people who create that friction are the nobility in Trumpistan. A lot of analysts talk about Trumpistanis as being blue collar, poorly educated, and ignorant. Some are. But what has made Trump a political force is his support from golfers. Men (and they’re mostly men) who make deals on golf courses because they can, are at the heart of Trump’s support in the business community.

Recycling People

Back in the late 1960s, as the Gods of Technology came for my dad’s TV repair shop with their “solid state” components that didn’t break, he got out ahead of them.

He loaded me into our car, he drove from New York to Los Angeles in three days, and he started to remake himself as a security expert. He ordered cards saying he was in burglar alarms, but when they returned they read only “Fred Blankenhorn, burgler.” 

He used the cards anyway, despite the typo, and the conversation starter got him in. He got into burglar alarms, bought a lock shop, and he kept the family together. (He is pictured near the end of the 1970s, on Balboa Bay in Newport Beach. Dad passed away in 1999.) 

When I drove by the Tower TV 5 years after we moved, the store I had grown up in was gone, replaced by a real estate office. I don’t know what happened to the poor guy who bought it.

Internet is the New Radio

Michael Wolff believes that “TV is the new TV.” Jeff Jarvis insists that a paper’s decision to go all-digital is not a death sentence.

Both, in the current economic environment, are fundamentally wrong.

You will find the answer when you turn on your TV. What you will find there is not action, and not news. You will find talking heads. Talking heads are cheap and draw audiences. This was true 50 years ago, when talk radio was first invented, and it is just as true today. TV is not the new TV, it’s the new radio.

A web site budget consists of three kinds of costs:

• Capital costs, the Web site and tools needed to create content on it
• Bandwidth costs, which have been falling over time
• Labor costs, which have been rising over time. These include the management costs needed to define and oversee the site’s mission.

A typewriter and word processing software are one kind of capital cost, but it takes a lot of labor to create things with them. A TV camera and studio set up are another kind of capital cost, but they take much less labor to create things with them.

Anyone with “the gift of the gab,” as Salman Rushdie wrote, can create an hour of TV or radio content in about an hour. But even the best writer (especially the best writer) may take many days to create an hour’s worth of reading material.

Intel Commits to the World of Always On

I began writing about what is now called the Internet of Things, or IoT, over a decade ago, at Corante, a fine site with no business model. It was during that period in the early 2000s where I made zero dollars from writing, but it's a period I'm now quite proud of. 

I called this technology Always On, because it works in the background and doesn't have to be turned on-and-off like a PC.  I wrote about experiments using motes, sensors, and tiny processors affixed to products, or just strewn around the ground in order to study wildlife. Inventory solutions can find your keys with this technology, I wrote, and monitoring solutions can water your lawn.   Health solutions can prevent heart attacks.

Many of these stories focused on Intel, which has now decided that the Internet of Things represents the future. 

Over the last few months Intel began showing retail solutions that can measure customers for clothes at a glance and track clothes in stores. A computer-on-a-chip called Curie is being shown at fashion shows, used for health monitoring and CGI displays that take place around clothes. It’s the flash end of the market. 

But Intel estimates that IoT already represents 4% of the company’s turnover.  The big money is in industry, in turning an Inventory of Things into an Inventory of Systems that can control refineries, collecting big data used to improve production and prevent accidents. It you have ever wondered why there have been so few big planes going down over the U.S. lately, part of the answer lies in this technology, which constantly monitors a plane’s condition and alerts airlines to maintenance needs before conditions grow critical. IDC Research now sees this as a $1.7 trillion market within five years. 

Standards are going to be vital in the IoT, to enable interoperability, and Intel is busy creating and negotiating such standards with software companies as well as carriers. 

A lot of this market turns out to be in Asia, a market Intel failed to crack in its mobility quest. Asian companies can use IoT to help make factories run better, or to monitor both traffic and citizens.Security and privacy implications have many in the U.S. cool to this potential. 

None of this has yet to hit Intel’s stock, which is down almost 17% over the last year as PC sales have slowed and the company’s efforts in mobile have continued to flounder. But Intel still brings 25% of its roughly $15 billion in sales to the net income line each quarter, its cash flow averages over $15 billion per year, and the balance sheet shows over $100 billion in assets with long-term debt that could be instantly repaid, in a crunch, using cash and short-term instruments in hand. Intel, in short, can be here for the long haul.

It’s not often that an investor gets a chance to get in on the “ground floor” of something while at the same time buy a 3.6% yield that can be covered by net income three times. It’s not often you can buy something with a Price/Earnings multiple below that of the market, a safe investment with speculation of leadership in a market niche that is about to explode, as in trillion-dollar explode.

But that is what Intel is looking at, today.

Things with intelligence are becoming parts of intelligent systems, and Intel is ahead of the pack facing this opportunity. Come for the dividend, stay for the speculation.