Dana Blankenhorn

Fire Sundar Pichai

Recessions are good for markets.

They show us where the rot is, where the poor performers are.

This current one is no exception. It revealed that some of our Cloud Czars, the companies dominating the global economy with hyperscale datacenters paid for with cash flow, aren’t as clothed in gold as they seem. Some are downright naked.

Early this month, I identified one source of rot and urged Jeff Bezos to fire Amazon.Com CEO Andy Jassy. But it’s also time for two other founders to get back in the game. Larry Page and Sergey Brin need to push out Sundar Pichai.

Pichai is the kind of numbers-oriented manager Wall Street loves, but Silicon Valley should despise. He’s the kind of go along, get along guy who can make the trains run on time, but completely lacks vision. In technology this is a fatal flaw.

It’s obvious in how he dealt with artificial intelligence, the new hotness of 2023.

This is not about firing an ethicist. It’s a more basic failure to see where things were going, and deploy the necessary resources to get there. 

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.

Cloud Czar Conundrum

In 2021, governments around the world hate the Cloud Czars.

They don’t like seeing companies both build infrastructure and rent it out to competitors. They don’t want Amazon to compete with Netflix or Walmart. They don’t want Microsoft hosting Salesforce, then building its own suite. They don’t like Google doing search while it rents its cloud. They don’t like the Apple app store. They blame Facebook for Trump.

It’s not just here. China is doing all the things Americans just pretend to want, taking down Alibaba, Tencent and Baidu with new regulations and demands. Of course, the same people who want Facebook destroyed pretend that China is going after Alibaba because “it’s communist” and Jack Ma a threat to the regime. (As if Mark Zuckerberg isn’t?)

Here’s the problem. Clouds are expensive. The price started a decade ago at $1 billion/quarter. Now it’s about $5 billion/quarter. That money isn’t borrowed. It all comes from cash flow. The game was said to be too rich for AT&T, too rich for IBM, too rich for HP and Verizon.

Moore’s Law of Health

One topic in the coming re-write of my Moore’s Law book, now called Moore’s Law Explains it All, involves what I call Moore’s Law of Politics.

Moore’s Second Law, the rising capital cost of chip making, offsets Moore’s Law itself. Moore’s Law of Software, its value increasing with use, offsets Moore’s Law of Content, because most content doesn’t gain in value once you read, hear or see it.

At the same time Moore’s Law of Health, the fact that technology lets us live longer, creates a negative in Moore’s Law of Politics.

Political decision-making is stuck in the past.

I got a reminder of this during my recent trip to Heidelberg. I met a young Vietnamese mathematician. He was about the same age as my own son, 28.

I asked him about the Vietnam War. To him it’s an historical relic, like our Civil War. Even his father wasn’t impacted by it. It’s something from his grandfather’s time.

FUD the Free Web

It shocks me how many tech writers and self-proclaimed liberals have joined the recent attack on the Free Web.

That’s what Facebook is. That’s what Google is.

They’re the free web.

They don’t charge you for using them. They’re free. Access isn’t free, and neither is most of the information the Web provides. Most of the news today is hidden behind paywalls, available to subscribers only.

But Google and Facebook are free.

The attackers say that on these services “you are the product.” They like to say that because they can afford the cost of subscribing to all the things which interest them.

Google and Facebook have built over $1.3 trillion in market cap, and almost $200 billion per year in annual revenue, with an advertising business model. They won the market and invested their money in building what we today call the cloud. Unlike the phone companies and everyone else, they invested ahead of their growth. Facebook put $1 billion/quarter into its server farms before it had the revenue to back it up. These are risk-takers. They’re what capitalism is all about. They’re Amurica.

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.

Monopoly, Market Advantage, and Mouthpieces

The long-running scam on which this blog was originally based was the AT&T monopoly.

Since the 1984 Bell break-up, AT&T has been recreating itself, like the brooms of the Sorcerer’s Apprentice sequence in Fantasia. What were originally 7 regional Bell companies merged into 2 regional Bells, then those two bought the long-distance operators with big market share in the Internet core. AT&T is descended from Southwestern Bell, one of the original 7, and changed names when it bought the long-distance operation.

AT&T has spent most of its corporate life grifting off government. It won huge subsidies to create “universal service” over a century ago, and it eventually won the end of price regulation on the service. It continued its grifting on the Internet. A “universal service fund,” derided as a “Gore Tax” by opponents, was a subsidy, crafted mainly for AT&T, aimed at delivering broadband service to rural areas and urban ghettoes.

The Core and the Edge

Think of this as Volume 18, Number 12 of the newsletter I have written weekly since March, 1997. Enjoy.

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The IN in the word Internet stands for interactive. (Right, Sir Tim Berners-Lee, whose 1989 paper set the terms for today's World Wide Web.)

The assumption of its designers was that the Internet would be a two-way network, that as many bits would flow in one direction as the other. Peering, the original financial agreement underlying today's Internet, is based on this assumption.

The Internet, in other words, was not designed to be TV. It was not designed to be a passive medium, as something you watch, or read, or listen to. We already had such media. The Internet was designed to be something you interacted with.

That's not how things are working out in our time. The Internet is becoming TV, is becoming something you watch, or read, or listen to. The bits are mostly flowing in one direction, from the core to the edge of the network. Most of the technical standards underlying consumer Internet traffic, like DSL and DOCSIS, are designed to let bits flow faster downstream than upstream, on the assumption that more bits would do that.

Google is Not at War

I have always been annoyed by the lazy "great game" tech analysis of reporters who would rather be covering politics than business.

An example is found in a recent TechCrunch piece on Google. Headlined "Google's Six-Front War," it focuses on the areas of business where Google is now concentrating its energy under co-founder (and now CEO) Larry Page.

VC Ben Horowitz started this nonsensical meme, calling Page a "war time CEO" in contrast to the "peace time" leadership of predecessor Eric Schmidt.

There are two things that are true here. First, Page is paring down the company's development focus. Second, he's focusing the company's energy on areas where it is in direct competition with other big companies. Microsoft in browsers, Apple in mobile, Facebook in social networking, etc.

This is natural. This is good. Page is wasting fewer development hours, he's aiming to monetize his infrastructure advantages in various ways, he's working to compete.

Free the WiFi

There are two reasons to share things via open source. So they won't become worthless, and so they can become more valuable.

The Sega game machine is an example of the former principle.  Had Sega been able to donate the code when they killed the product, it could have had an after-life. As it was, owners now have bricks.

WiFi is an example of the latter principle.  The Electronic Frontier Foundation now says it wants the WiFi protocol “opened,”  allowing free sharing of unused bandwidth.

Peter Eckersley calls fears of privacy and security that have made people lock their WiFi routers a “tragedy of the commons” and suggests the launch of an Open Wireless Movement to fight back.

I wrote something very similar two years ago, from Chengdu, where I was able to post stories only because of open wireless connections in a Chinese condo project. My hosts let us use a great apartment, but it had no computer, no Internet. Without the open connections of nearby units, which admittedly were on intermittently and didn't provide a ton of bandwidth, I would have been gone from the Web all that week. As it was, I delivered some of the most popular things I ever did write at ZDNet.