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.

VinFast: The Fix is In

America has the largest stock market in the world, by far.

It should be the most honest and most transparent.

It’s not.

The ease with which shysters manipulate our markets is appalling.

I saw it last year with AMTD Digital and Magic Empire. Both came public through a Hong Kong investment house. They had a limited float, but a ton of shares behind that float. Thus, when the share price here rose over scarcity, so did the market cap of the whole.

It was ridiculous, until the rug got pulled. MEGL traded for $97. HKD went for over $172. Now MEGL is under $2, and HKD is at $6. That’s still more than they’re worth.

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.

Meet the New Slum

Building a 21^st century city means ditching late 20^th century street plans in favor of the era before World War II.

That’s because 21^st century cities demand density, and mixed uses. The idea of fixed use zoning – offices, stores, homes separate – needs to go away. The most bike-able parts of Atlanta are on the east side, where Atlanta, Decatur, and Avondale Estates all had established street plans before Pearl Harbor. Outside that, roads are a half-mile apart, everyone is on a cul-de-sac, and you need a car to go anywhere.

Decatur can be a model, if area parking decks are organized so streets like Clairmont and Ponce de Leon can become car-free. What’s left are rows of four story blocks with homes or offices upstairs, restaurants and retail on the ground floor. This leaves room for small parks, which the nearby MARTA station delivers. It’s the best planned urban space in the Atlanta region.

DeKalb County had a chance to replicate this a few miles to the east, at the Kensington MARTA station. Instead, what’s going up are Stalinist rectangular blocks surrounded by street-level parking. It’s a 21^st century Pruitt-Igoe that will, by 2035, have the highest crime rate in the region.

Speaking of Sports

The most interesting economic story right now, verging on the political, involves sports.

Two business models are colliding.

The European business model is built on the club. Clubs organize into leagues, but government interference or subsidy is prohibited. The result is capitalism red in tooth and claw. There are haves, and there are have-nots. But there is some social mobility. A bad club loses money when it drops down the national pyramid. A good club can make money as it rises.

The American model is based on the franchise. Leagues control franchises, much like McDonald’s controls its franchisees. Government subsidy is actively encouraged. Most college teams are controlled by state governments.

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.  

Manhood vs. Brohood

I don’t pretend to be a great man. I’m barely average. I try to get better. I try to overcome an upbringing of white privilege, in the Long Island suburb of Massapequa, where I lived until I was 18.

My father passed away in 1999. He could be sexist, racist, and misogynistic. He could also be wildly creative, imaginative, and a great salesman. When he got very drunk (he was a WWII veteran) he’d call himself a “true Aryan.” But he did the best he could. He ran Tower TV, the local TV repair shop, then got into security and locksmithing after moving to California. All four of his kids wound up solidly in the American middle class. His younger son (not me) taught calculus to generations in Los Angeles public schools.

It wasn’t until I moved to Atlanta that I found true manhood. I found it in our “block club,” a group of families on our street who met monthly to exchange news and advocate for services.

The Real Cause of Extremism

A lot of ideas have been mooted to explain Christian radicalism and Fascist extremism among my generation of Americans.

Its cause is the same as that facing southern aristocrats in the 1850s, the accelerating pace of change.

I won’t relitigate the 19^th century. But the 21^st has seen change at ludicrous speed. Moore’s Law leaves nothing untouched. There’s no stability, whether in business or socially. Everything has gone online, from money to entertainment to community. What has come out looks frightening.

Oligarchs are Marxists

Rich dudes all claim a capitalist back story, red in tooth and claw.

But once they got it made, all oligarchs are Russian. They divide markets among themselves to make sure no one below can get in. This is why we need strict anti-trust laws.

Don’t believe me? Look at sports.

Every American sports league is run on a communist basis. Owners are guaranteed a profit. Revenue is shared, and costs are capped. Supply is artificially limited, so that governments can be extorted for new palaces the oligarchs control.

Americans have become blind to this. But when you get to soccer, the world’s game, the blinders come off.

That’s because in most of the world, where capital is limited, and where the word competition means something, the soccer business really is capitalist. Winners get most of the money, including the TV money. Losers get drummed out of the league and (eventually) out of the business.

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.