Dana Blankenhorn

Technology’s Dilemma

There is a bug at the heart of innovation, of technology, and of capitalism itself.

It lies in the incentives we give innovators.

It lies in stock ownership.

What liberals have condemned is the fact that nearly all the profit from innovation is going to a very small number of people. The winners’ founders, and their venture capital partners, get fortunes measured in the billions of dollars. Their key people also wind up as multi-millionaires. Everyone else, whether they’re line staff or just ordinary schmoes, can pound sand.

Sure, we all get some of the benefits. It’s cool to have cat litter delivered. It’s amazing that I can learn anything I want to know within moments. I can call my kid in Europe free. The software and hardware my son accesses, to automate cutting-edge medical tests is amazing. As a result, we’re starting to understand not only the genetic code, but what lies beneath it.

Still it’s true. The rewards are all going to a very small number of people. Jeff Bezos will never be able to spend the $150 billion he has access to. Bill Gates will never be able to give away the fortune he has won. Philanthropists are taking on the role of governments, self-appointed boards deciding the priorities on the nation’s wealth.

Capitalistic Feudalism

The central problem of our time is the march toward feudalism.

It began among capitalists.

Democracy is essential because it lets people change their minds and, upon changing them, reform the institutions that control their lives. That’s what the Declaration of Independence is about. It argues that despotic systems must be overthrown when they threaten our “life, liberty” or pursuit of happiness.

Many people, including me, have argued that the current attack on democracy began with The Jim Crow Project.

But long before one of our major political parties abandoned democracy, business did. It happened as these things usually do, with the very best of intentions.

As I noted last week, the system that came into effect in 1789 had only property owners voting.  The true genius of succeeding generations has been to expand the right to vote, thus the pool of those who can effect change, to more and more people. This work continues, and it’s important.

But there’s another kind of democracy, corporate democracy. It may be even more important than electoral democracy because even functional democracies operate by the Golden Rule – he who has the gold makes the rules.

Before we can hope to have electoral democracy, then, we must have corporate democracy.

We Are All Founders

There are two distinguishing features to the existential crises in American history.

The first is it makes us return to first principles, causing us to re-examine, criticize, and eventually deify the past.

In the run-up to World War II, a crisis that really began four score and seven years ago, in 1932, there was a vogue for Abraham Lincoln. Henry Fonda and Raymond Massey did popular biopics, and his memorial became a sort of Ground Zero for what was best in our political natures.

In our time, Lin Manuel Miranda did this to Alexander Hamilton while Ron Chernow, who did the biography of Hamilton on which the movie was based, proceeded to resurrect U.S. Grant. The purpose of both these pieces of art was political. Miranda wanted to highlight the importance of immigrants in getting the job done. Chernow wanted to push back against a Confederate-inspired view of history that still, 150 years later, has those who supported human rights being disparaged while those they fought are exalted.

We love to call America the world’s oldest democracy. We revere the founders as giants.  We even call them the Founders.

But the original Constitution was profoundly anti-democratic. Women couldn’t vote. Neither could blacks, nor native Americans. The franchise was reserved for white males, and not even all of them. You had to be a property owner.

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.

Fixing Health Care

The key to fixing our broken health care system is deceptively simple.

Give those who collect the income firm control of the outgo. There is no such thing as an unlimited draw from a limited pool.

We know this works by looking at the market as it exists right now.

The Veterans Administration takes the biggest risks, people who’ve served our country. They come to the system with terrible problems, and they age out in terrifying ways. Yet the per-patient cost of delivering health care to these people is a fraction of the cost of our other delivery systems, because the government controls both income and the outgo.

The VA is a single-payer system. It gets its money direct from the government, it has a clear mission and requirement to treat people, and it can bargain for the best prices. VA hospitals aren’t fancy, many of the doctors are new to the profession, the staff is stressed, and the whole system is rickety, but it works. And when the Trump people try to privatize it, when they seek to destroy it, this will become very clear to all veterans, even those who would otherwise love them some Trump. They won’t love them some Trump, or any other privatization-mad Republican, ever again if he succeeds in destroying their VA.

The Google Primary

One reason I’ve always been confident that Trump was doomed was because history has generational cycles, and the rising generation hates him.

Another reason is that American politics are based on economic cycles, and the economic future hates him.

America runs by the Golden Rule. He who has the gold makes the rules. The business of America is business, and the business with the highest value-add calls the tune.

Back in 1979 this was the oil industry. Jimmy Carter defied oil with a cardigan sweater and a call for conservation. They buried him.

Exurbs are the New Rust Belt

Here is where economics, politics, and technology converge.

Trumpism is driven by exurban voters. There just aren’t enough people in the rural areas to drive a competitive candidacy. It’s obviously the exurbs.

Exurbs are suburbs of suburbs. Their locations shift as people move further away from urban employment centers. When my folks moved to Orange County in the 1970s, Huntington Beach was an exurb. Today Riverside County, where my sister lives, is an exurb.

Exurban economies are based on gasoline and real estate. Drive until you qualify. The money is far away so you need a big car, and a lot of gas. Doing anything requires a drive. Serving the needs of a car-centric society is what the exurbs are all about, supporting people with shopping and services.

When I was young, exurbs were in fashion. Control of resources added more to economic growth than anything else, but for that to become value, the resources had to be used. That’s what exurbs do best.  Technology meant future growth, but only in the last decade has technology become central to the economy.

This is the important point.

The Elite Web

A lot of people like to complain about the lack of online freedom in China.

It’s true. The government there decides what people can and can’t see, what they can and can’t say. The social conditioning is impressive and made more impressive by the constantly-growing economy.

But if Jack Ma, or anyone in his Alibaba executive team, wants to learn something from the online world, or say something online, it’s not a problem. The same at a thousand other large enterprises. Freedom is doled out with an eye dropper, but for those who need it the firehose is available.

Is the situation better in our country?

What Comes Next

After the market falls, when everyone is in despair, is when I get the most excited about the future.

That’s because recessions aren’t so much an ending as a beginning.

A recession means the old games no longer work. The oldest business processes disappear entirely. WE have seen this during every recession of my working lifetime.

Small towns fell under the onslaught of Walmart in the 1980s. Big boxes replaced department stores in the 1990s. In the 2000s, whole layers of middle management disappeared. In this decade, gatekeepers like insurance agents have gotten the boot.

Common Carriers

A key to understanding 2019 will be the issue of common carriers.

In just one decade the “Cloud Czars” – Apple, Microsoft, Google, Amazon and Facebook – have replaced the telecommunications and broadcast industries with a new system, using their infrastructure.

We don’t make overseas calls anymore. We Skype. We don’t watch TV. We stream.

The cloud was built without government subsidy or interference, in a competitive free for all in which the winners invested while the losers did not. The industries replaced by this infrastructure were built as monopolies, under systems of regulation controlled by the Federal Communications Commission and, when necessary, courts.

This made sense, in terms of both capital preservation and technology, at the time.