Dana Blankenhorn

The Biotech Cathedral and the Bazaar

We have become accustomed, in the first decades of the 21^st century, to thinking of technology as providing the highest value-add.

Software, made by hand but scaled instantly over cloud networks, is where the money is today.

But that will not be the case a decade from now.

The next revolution, in biotechnology, is already underway. I’ve described it as “DNA as a Programming Language.” While I made my life in computing, mostly as an observer, my son is now making his way into biotech, as a participant.

COVID-19 provided the “Visicalc moment” for this revolution, the giant “ah-ha” that created the mass market. Moderna, BionTech, and mRNA technology, gave the west vaccines against the disease long before older technologies. Moderna developed its vaccine within days of getting the DNA map of the COVID-19 genome.

Ghosts of Our Fathers, Angels of Our Nature

When someone says of the Fascists, oligarchs, religious bigots, and racists of today’s Republican Party “that’s not us,” I shake my head.

That is us. I’m a history major. America has always been a battle between our ghosts and our better angels. There’s nothing Russia or China can teach us in that regard.

• Slavery? We perfected it, in the American South.
• Genocide? We perfected it, in the American West.
• Eugenics? We invented it, in American cities.

The Taliban have been here since the Puritans. Nearly all Christianity’s craziest cults were American-born. The Great Awakening of the 19^th century was just an appetizer.

Metaverse From the Bottom Up

There’s an enormous amount of capital going into what’s called the metaverse today. An awful lot is being written about it. The vast majority is being wasted.

I know this because Moore’s Law has been around for almost 60 years. Two generations. We know how a change like this occurs.

It occurs from the bottom up.

It was start-ups that forced IBM into mini-computers and, later, into PCs. Digital software natives Microsoft and Apple eventually pushed IBM aside entirely and let its own bureaucracy devour it. The same was true with networking. If we waited for AT&T to build the Internet, we’d still be waiting. It was the government’s insistence on open standards, driven largely by the needs of national defense, that drove the model in the 1990s.

Tech Demands Freedom

America dominates the global tech economy because freedom.

The freedom to think what you want, and be who you want, is now the key to economic growth.

This is a point that’s widely ignored by American elites today. Americans love to talk about what’s wrong and have overestimated our global adversaries since 1776.

It’s most obvious now in our economic competition with China.

China is a great manufacturing power. But it continues to trail in software and science. It deliberately put down its Cloud Emperors for threatening the state. It can’t deliver the latest semiconductor technology.

Software is the product of hands and minds. You can’t automate its production, the way you can a car. You can improve productivity with better tools. But organizing a team requires that coaches listen as well as speak. Man management, they call it.

The best scientists, coders, and writers are all motivated by something inside. We’re not doing it for the money, we’re not doing it for an ideology. We each have our own reasons. In my case, it’s a desire I’ve had all my life to be heard, to be seen, to be part of the conversation. If you want to get the most out of us, you must respect that. China’s government doesn’t respect that.

Spoiled Rotten

When I was a kid in the 1960s and my late mother was mad at me, she’d say I was “spoiled rotten.”

Looking back, I was. So were most people of my generation.

We still are.

Our privilege as Baby Boomers makes us assume everything should be perfect all the time. When it isn’t we complain bitterly.

Right now, America is in the best of all possible worlds. We have the world’s strongest economy. Our unemployment rate is below 4%. COVID is in retreat.

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.

Saving Facebook (Uh, Meta)

Shares in Facebook, uh Meta Platforms, continued to fall on February 7.

The most recent price, about $230/share, is just 16 times last year’s earnings. Considering that the average stock in the S&P 500 now has a PE of over 25, and that Facebook is bringing a quarter of its revenue to the net income line, that’s absurdly cheap.

It’s cheap because analysts are reading a shortfall in growth as a harbinger of doom. The three main apps – Facebook, Instagram, and WhatsApp – are losing popularity because people don’t trust the company. A lot of its future gains are going into “metaverse” software that analysts don’t understand.

Beyond the Cloud

Another earnings quarter is in the books, and it wasn’t great for the Cloud Czars.

Microsoft, Google, and Apple reported strong quarters. Facebook crashed. Amazon was saved by its investment in Rivian, which has been falling since the start of the year.

But there’s more to tech than the Cloud Czars. There’s even more to the cloud.

The Clouds are evolving into tech’s landlords. Amazon, Microsoft, and Google dominate in market share, other players are falling, but that masks another reality. The market is growing at 40%/year, at scale. Anyone can spin-up a set of cloud servers inside a data center REIT, then scale globally by running excess capacity with one of the Czars. If you need capacity near customers, just use a Content Delivery Network, a company like Akamai or a “cloudless cloud” like Cloudflare, which also provides security.

Wall Street is Wrong Again

Wall Street is wrong again. But then, it usually is.

Wall Street is a casino. If no one trades, there’s no action. It’s in the Street’s interest to keep the action going. The way to do that is to convince investors that they’re wrong and the grass is greener somewhere else.

The latest myth to be smashed is in the direction of the economy. Wall Street placed big bets on slowing growth, on money costing money and on tech’s cash flows being discounted.

Wrong again. Fourth quarter GDP was again very strong. There are already indications the inflation storm is abating. The reason is technology, which continues to cut costs from manufacturing to the final sale.

I’ve now spent a decade covering markets, after three decades covering tech. My tech stories focused on the lessons of business, and my business stories focus on lessons from tech. I’m not trying to sell you anything. I’m a reporter. I’m telling stories, most of which happen to be true because I’ve been at this a long, long time.

What to Teach Journalists

I have always had a love-hate relationship with my journalism education, which came from the Medill School at Northwestern University in 1977-78.

Back then Medill taught that journalists were people who worked for people who bought ink by the barrel. The analogy has shifted (bits by the petabyte) but the idea remains the same. Journalists work for others. We have no real control over their career path. We’re dependent.

I can understand that. It’s a comfortable feeling, getting a paycheck and ignoring the market. But I didn’t get to be my class’s last man standing on his beat by being dependent. I’m a freelance. I have defined my own coverage area, which is the future with a business orientation. Following the Medill career path would have had me out of this business decades ago.