Dana Blankenhorn

Word of the Year: Enshitification

Enshitification is what happens when principles go out the window.

Principles like service, like honor, like honesty, like “a little looking for the other fella,” as James Stewart said in Mr. Smith Goes to Washington, are what make civilization possible. When they disappear, as they have over the last several years, it doesn’t matter much what your system is or what your laws say. Those with power will take it, and only the strongest will survive.

This is mostly discussed today in the realm of politics. Words have lost their meaning and are often used to mean their opposite in the name of victory. Facts mean nothing and are simply denied in the name of power.

Health Care Mystery Solved

Around the time Barack Obama became President, I ran a health IT beat for ZDNet.

One point hammered home to me was that 75% of America’s health care bill relates to chronic conditions. These are things like heart disease, diabetes, and complications from smoking or drinking.

The way to cut the bill is through preventive care, I learned. Make sure people see a doctor regularly. Use those visits to monitor their condition, to hector people about their choices, and to get us to take our medicine. Keep us out of the hospital and everyone wins.

Obamacare covered that, for most people, especially those on Medicare. It also covered the cost of computerizing clinics and hospitals. While too many people are still forced to fill out too many forms, there are now electronic records on most of us. Hospitals can find out what patients are supposed to be doing and (through test results) whether we’re doing it.

The Next Crash Will Be a Private Equity Crash

There is always a next crash.

The problem is we never know when it might happen, or what might trigger it.

I can’t answer the first question, but I can answer the second.

It will be private equity.

Private equity has been taking over the world for the last 40 years. It arbitrates against financial regulations by design. The idea is that people who invest in such a fund are guilty of wealth and, thus, can afford to take a loss.

But are they? Any loss, taken in any market, results in some panic selling. We see it in every crash.

The problem is that there’s now more private equity running around than public equity. The canary in that coal mine is the banking business.

Private lending has exploded in recent years. This is a $1.5 trillion business that’s crowding out banks. This was a $1 trillion business just two years ago. It’s growing that fast.

Biden’s Plan Worked. Get Over It

Business reporting should be about telling people what they need to know, not what they want to know.

That’s not businesses are buying. Sad. It’s not what they’re getting, either.

Too many businessmen only want their egos massaged, and their political inclinations confirmed. This is true when it comes to reporting, my own field, where we have Forbes, Fortune, Business Insider, and a host of other Republican-leaning publishers spinning the news. It’s doubly true for CNN and CNBC. The latter has an on-staff “wealth reporter” specifically hired to fluff the egos of his betters.  

Sadly, it’s also true for economists, those “experts” hired by big banks and brokerages to figure out where things are headed.

Over the last month I’ve been treated on TV to a parade of so-called financial experts, each one confidently predicting that a recession is imminent, that it’s baked in, that it will likely be severe. These jamokes have insisted this will end the drive for working from home, that it will end demands for higher pay, that it will bring employees crawling on their knees to their bosses for a crust of bread, a revived dress code, and a two-hour daily commute.

It was all bullshit. It was spin. It was politics. It was telling people what they wanted to hear.

The evidence is in. GDP grew 2.4% in the last quarter. The economy isn’t slowing. It’s speeding up.

Want to know why? I’ll tell you.

A Lesser Class of Billionaire

I’m old enough to remember when the image of a billionaire was of a man like Sam Walton, who walked humbly and became the source of stories focused on how he was just like the rest of us.

He was followed by people like Bill Gates and Warren Buffett, who saw wealth as a tool, and who resolved to give that tool away when they were done with it. Other wealthy people emulated them, signing pledges to give their wealth back to the commons, because everything we have is merely borrowed from our time and must be recycled when we’re gone.

Over the 15 years, however, a new kind of billionaire has emerged. They’re malevolent, not benevolent. Some of their fortunes, like that of Elon Musk, are self-created. Others, like that of David Sachs, are built using other peoples’ money. Still others, like Harlan Crow, just inherited their wealth.

But this new class of billionaire is uninterested in their fellow citizens. They see wealth as a means with which to both obtain political power and maintain it even after they’re dead. They now control our courts, they fund our elections, and they think they’re better than anyone else.

Billionaires are now threatening the very structure they built.  

Open Source in an AI World

The history of generative AI begins with a betrayal. 

OpenAI, meant to give developers a high and rising model for AI development, went closed source and got into bed with Microsoft. Now Microsoft is leading the charge to regulate AI, raising costs for competitors and creating closed source lock-in. The company wants licensing for all AI, bureaucratic delays before anyone or anything can compete with its proprietary offerings.

The current listing for the Google AI page claims it offers an “ecosystem of open-source tools, datasets, APIs and more.” But open source is never mentioned on the page itself. Google, like Microsoft, now thinks AI is too dangerous to be put into the community’s hands.  

If it’s that dangerous, guys, then ban it. Forbid machine learning, forbid progress. If code exists, someone will try to misuse it. That’s part of the law of code. The only answer is for code not to exist.

Save the Kindles

You can be comfortable in a big company. But you can also miss opportunities because they don’t look big enough.

Take Amazon.Com. They’re on track to bring in $500 billion this year. About half will be in merchandise sales. The other half will be in services of various kinds. The stock fell after earnings because the cloud unit projected slower growth, some of it driven by its own effort to help customers lower their cloud costs, some by the cost of adding AI software to AWS. Overall, Amazon stock is a buy.

My problem is Amazon has become such a sprawling business that some divisions are just too small to merit attention.

Take the Kindle book division. This is funny because Amazon started as a bookstore.  

I like the Kindle. An e-book reader is lighter than almost any book. You can use it with the lights off. A Fire Tablet can cost just $40 and serve as a personal TV. You can get refurbished Kindle readers dirt cheap.

E-books make printed books seem an environmental disaster. E-books also save money. Amazon offers a $10/month library service called Kindle Unlimited. I consider it a bargain. It offers lots of e-books at $1 to $3.

But in all the efforts by some states to ban books and close libraries, you haven’t heard a word from Amazon. That’s because the Kindle business is so small, by Amazon standards, that the company would rather keep quiet than pursue an opportunity that might be controversial.

Democracy is Hard

Here’s a truth no one likes to admit.

Being a citizen in a democratic state is much harder, and takes much more work, than being a citizen in an autocratic state.

You need to think about things that may not matter to you. You should vote. If called upon, you have to drop what you’re doing and be a juror. Even if it takes weeks.

It’s a lot easier to just complain about government and keep your head down than take public affairs seriously. You have a life. You’re just trying to get by. Democracy, if you’re poor, comes off as a middle class affectation. Most people in this world are poor. Very poor. Even wretchedly poor.

The (New) Generation Gap

As we boomers aged, we avoided the Generation Gap that bedeviled our parents.

We didn’t disagree on the war. We let them indulge their passions. We tried to be friends and, while that wasn’t always a great idea, it did keep the peace.

But now that they’ve grown, that gap has finally arrived, in a way we never saw coming.

In a way it’s class warfare. Today’s millennials have less money than we boomers did. Most can’t afford a home. Many can’t even afford a car without help.

They’re not as heavily into things anyway. Their emphasis is on living. This is an over-generalization, of course. Some 30-somethings do have McMansions. Some own giant pick-ups. But most rent, and the rent’s too high.

The Apartment Crisis

I wrote about the housing crisis” last year. My focus was on the tax law. It needs to discourage private equity from buying up houses, and encourage home ownership.

But there’s a second element at work. It’s demographic. Millennials, like my kids, aren’t marrying. If they’re marrying, they’re not having kids. They want small apartments near where they work. Most of them work in cities, where it’s very expensive to build.

Developers, united with young renters, are trying to increase density by block-busting urban homeowners. That’s what a lot of the current “affordable housing” debate is about. I saw it in the 1960s, when it was a racial divide. It’s ugly and leads to crime.

The good news is that apartment construction is already increasing. It is now near the level it was in 1972, just before the first oil crisis. If interest rates moderate even a little, the industry will blow past that number. 

I’m no NIMBY. Planned density can work. But rather than giving developers open season to wreck home values in the name of “15 minute neighborhoods," destroying the tree canopy, start with “30-minute cities," so that the infrastructure keeps up with the demand.