Dana Blankenhorn

Tech, Change and the Fed

Even 50 years on, we don’t understand Moore’s Law. 

Moore’s Law accelerates the pace of change in every direction. It’s not just about silicon. It’s not just about technology. It’s about what is enabled.

Two things that are enabled by technology are deflation and change. The first is a subset of the second. Technology lets consumers and businesses adjust to change rapidly. This is true not just because technology is improving, but because its adoption keeps increasing.

Moving technology from a desktop to a smartphone is a step change in its adoption. Smartphones let us compare prices inside a store. They let us route around traffic jams. They bring the office to the job site. You can find whatever you need to know, from anywhere, using a smartphone.

A world of instant answers means a world of instant adjustment. Demand can adjust faster than supply, but supply can adjust too. We all went into lockdown together, we all came out of it together, we all demanded products together, then we demanded services together. There was a lag, but by and large the economy has kept up.

Some changes are permanent. We don’t need offices the way we did. You can appear on TV from your living room, kitchen, or bedroom. What I’ve seen, as a business reporter, is that the economy can now react ahead of policymakers. Even the Federal Reserve, which can adjust policy every month or even within a month, can no longer keep up.

Economic Precipice

Today is the calm before an economic storm.

The Federal Reserve is hiking interest rates to slow inflation. Many commodity prices are already coming down. But if it hikes too fast, economic activity will slow and that will be a recession.

To Nouriel Roubini (right), the economist known as “Dr. Doom,” a recession at this time could quickly become a depression, because public debt remains at historically high levels. If you owe $43 trillion at 1%, it costs $430 billion to carry it for a year. At 3%, it’s $1.3 trillion. Your budget just got broken. That’s his reasoning.

But debt owed to yourself isn’t real. We can print that $1.3 trillion. The risk then is that the dollar falls off a cliff. That’s not happening. If anything, the dollar is too strong. We’re importing deflation. Every western nation, and China, has massive debts.

It’s why the doomsayers were wrong in 2009, and again in 2020. It’s why we couldn’t fight the Trump tax cuts. They didn’t create inflation. They didn’t sink the dollar.

A Non-Standard Story of Solar Shingles

When I first covered renewable energy a decade ago, solar shingles were the Holy Grail. It was what everyone said they wanted to make. A solar shingle would be as efficient at creating electricity as a solar panel but would go on just like a regular roof, with a nail gun.

A lot of people tried and failed to create the product. Home Depot tried selling homeowner-installed solar panels. Elon Musk built a billion dollar “Gigafactory” in Buffalo, New York, supposedly to make solar shingles.

But at the truncated Consumer Electronics Show (CES) in Las Vegas this year, a game-changing solar shingle finally debuted. Its story is almost as interesting as the technology.

The shingle is called Timberline. Sandia Labs helped develop it. The manufacturer is GAF Energy.

The shingles are slightly bigger and much heavier than conventional roof shingles, but they go on the same way, with a nail gun. GAF says it has invested $1 billion into the product, which converts 22.3% of solar energy hitting it into electricity. 

GAF itself may be more interesting than its shingle. It was once the U.S. arm of I.G. Farben, the Nazi chemical company seized after World War II.  Under Jesse Werner, it became a big roofing company in the 1980s. This included an outfit called Rubberoid, which owned an asbestos mine in Vermont. (Oops.) Under the name G.I. Holdings, it went bankrupt in 2001 but was still paying out to victims in 2011.

2022: Look Around, Look Around

When I first started writing about politics 15 years ago, my text came from my first poli sci teacher at Rice University, the late Dr. Gilbert Cuthbertson.

Doc C, as we called him, taught that politics could be explained by three variables:

• Myth, the stories we believe about our past, present, and future.
• Values, the lessons arising from those myths.
• Power, the result of applying those myths and values in the public square.

Myth x Values = Power. This lets you solve for Myth and Values. Myth = Power/Values. Values = Power/Myth.

What this means is that power comes from what we believe and what is within our control.

Americans today act as though we’re in the Great Depression, World War II, and the Civil War, all at once.

On the right, our values are under dire threat from enemies within. On the left, our democracy is under dire threat, also from enemies within.

Yet if you look objectively at our situation, it’s quite the opposite.

2021: Intensive Care

Elon Musk is Time Magazine’s Person of the Year. He has a fortune estimated at $245 billion. But it’s clear he’s not happy.

America is the world’s wealthiest country. The cloud, its applications, the clients, and the services connecting to it, have made America more economically dominant than ever before. But none of that has trickled down. Even tech executives who would benefit most from the creativity of minds freed from want, have made it clear they won’t let it trickle down.

In a world where the 10^th richest country, Canada, has a GDP this year of $1.6 trillion, four American Cloud Czars – Microsoft, Apple Amazon, and Google -- are worth more. In a country worth $63,000 per citizen, there are children going hungry and 9 centi-billionaires. Our wealth is tied up in assets. It’s not doing any work.

One weird trick is keeping this Second Gilded Age gilded. Punching down. When Elizabeth Warren proposed taxing billionaires, they promised to avoid it, and said go after the millionaires. The millionaires then said they were also adept at tax evasion, so go after the upper middle class. The upper middle class armed itself against the middle class, the middle class against the lower middle class, and the lower middle class against the poor, whose only hope is to reproduce.

We’re all so afraid of losing what we have that we reject anything that would let us create more. In West Virginia one-quarter of the population is missing its teeth, while their Senator rejects dental care under Medicaid.

Controlling Data for Good

When we talk about control over data, we start with metadata. These are vast stores of data on what people are searching for online, data about data.

Google and Meta Platforms (Facebook) use metadata to control advertising. Metadata lets advertisers reach specific consumers for the same price as the general network. The aggregation and organization of markets, once done through journalism, no longer pays.

The same techniques, applied to content, led us to Trump. Victims stay within a walled garden of propaganda. Facts can never get in. People don’t just vote based on this. They refuse vaccines, buy guns, and die. He who controls the data makes the rules.

The Creativity Economy

The Creativity Economy is why Trumpism won’t win.

Technology created the Creativity Economy. Creativity is now the gating factor to economic growth. America has more creativity than any other country, thus more growth.

This means more than having talent. Lots of places have talent. But the Creativity Economy has needs that go beyond having talent. Talent must be taught, and it must be free to learn. It must be mentored. Most importantly it must be empowered. Anything, or anyone, who says “no” to a creative person is harming the economy.

Creativity has many dimensions. The Creativity Economy draws from all of them. Whether your talent lies in organizing, in selling, in technology or explaining it, in music or art, the Creativity Economy needs you. Many business leaders don’t have degrees in business. Part of nurturing the Creativity Economy is giving people the freedom to change their path.

The Bresch File

If there’s an identifiable villain in America’s health care cost crisis, it’s Heather Bresch. 

If you have a kid who might die from food allergies, or if it might happen to you, you have an EpiPen. If you have asthma and worry about a sudden attack, you have one. It’s a necessity, an insurance policy against sudden death.

The EpiPen contains epinephrine, more commonly known as adrenaline.  Adrenaline is a hormone that can increase your blood pressure and heart rate. If you’re scared, or highly energized, your body releases adrenaline and performs better. It can stop the shock from food allergies. It can stop an asthma attack. 

During most of the last decade, Bresch was the CEO of Mylan. As CEO, starting in 2011, she pushed huge price increases on EpiPens. She made small changes to the injector to win patent protection. She called epinephrine generic to avoid having to pay Medicaid rebates. Mylan bought the rights to make the EpiPen in 2007 and had a 95% market share in 2016, increasing the size of the market five-fold. By this time, Mylan was selling two-packs of the pens for $608. 

In response to the scandal, Bresch stonewalled Congress. She claimed price increases were the result of research costs. They weren’t. She pretended not to know key details on pricing or the company’s policies on patient assistance. Eventually, market pressure forced Mylan into a merger with Pfizer’s generic drug business, which is now called UpJohn. When the UpJohn deal was done, Bresch “retired.” At age 52.

Any prosecutor who couldn’t make a criminal case out of this isn’t worth their law degree. So far, no one has. Wonder why?

Will Rogers Was Right

“I’m not a member of any organized political party. I’m a Democrat.”

Will Rogers’ saying of a century ago is just as true now, even though the political positions of the parties have reversed.

Republicans are united. Once you’re in, all you need do is follow the leader. They make it easy. You never have to think. It doesn’t matter if the leader is a madman, or you’re taking the country off a cliff. That’s why Joe McCarthy wasn’t fatal. Neither is Trump.

Democrats remain a collection of interests. Instead of ethnic machines and southern whites, it’s a rainbow of McGovern-era complainers.

Democrats make it very hard to be a Democrat. Liberal elites are constantly creating new red lines, and anyone who crosses one crosses them all. Anything that goes wrong, whether large or small, is a sign of the apocalypse, a sign to surrender rather than attack.

The Past is a Sad Country

Of all the songs on Jason Isbell’s breakout 2013 album Southeastern, it’s Relatively Easy that holds up best.

“You should know, compared to people on a global scale, our kind has had it relatively easy.” But people are still unsettled. A brother is on a church kick, “just another form of dope sick.” A man’s wife takes his kids away and he takes Klonopin, “enough to kill a man of twice his size.” The narrator tore up his loft and is now on parole, alone.

Everyone wants more, and prosperity doesn’t change it. We all think it was better back then, that it’s all terrible and about to get worse.

It isn’t. The past wasn’t good. We live longer than ever if we’re not getting ourselves shot, overdosing on drugs, or refusing vaccines. Middle class Americans are richer than anyone in the history of the world, thanks to technology and the creativity economy. We have nothing to complain about.