Dana Blankenhorn

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.

The 1979 Game

When you win the popular vote by 9.5% but still lose ground, as Democrats did November 6, your problems are systemic.

The result underlies tech’s obligation to come out of its shell and fight for the political system that birthed it.

Tech moguls have done some things. Jeff Bezos bought The Washington Post, Marc Benioff bought Time Magazine, Laurene Powell Jobs bought The Atlantic. The key to gaining more power will be in creating journalism business models beholden to tech interests.

Tech must do to Bizarro Carter what oil did to Jimmy Carter, and for the same reason -- to protect its self-interest.

Peak Carter, Peak Trump

One thing that has surprised me over the last two years is how almost no one understood my point right after the 2016 election, that Donald Trump is a sort of Bizarro Carter. 

By that I meant he is completely the opposite of Jimmy Carter. Carter was a Democrat. Trump is an Autocrat. Carter believed in human rights. Trump believes in the divine right of kings. Carter championed the environment. Trump trashes it. Carter said he’d never lie to us. Trump lies 6 times before breakfast.

What they have in common is they represent the end times for the Political Thesis that birthed them. Carter was elected 44 years after Franklin Roosevelt and was the last President to run on those principles. Trump came 48 years after Nixon and will be the last President elected under the Nixon Thesis of Conflict. 

Moore’s Third Law

Almost 20 years ago I began the most important work of my career.

My working title was "Moore’s Lore,” stories about Moore’s Law. A "marketing expert" insisted I put my name in the title. 

The original Moore’s Law, described by Intel co-founder Gordon Moore for Electronics magazine in 1965,  estimated that circuit density could increase for 10 years, at the same cost, and indeed by 1975 Intel was shipping chips that had over 64,000 circuits on them. Moore then “formalized” the law, saying he expected density to continue doubling, at the same pace, for as far as he could foresee. 

That’s Moore’s First Law. Moore never mentioned a second law, but it’s there.

Moore’s Second Law is that just as circuit complexity grows exponentially, so does its capital cost. While you can make up this cost by making more chips, it means the chip-making business is consolidating. Today there are only four manufacturers of microprocessors – Samsung, China’s Taiwan Semiconductor, the Middle East’s Global Foundries, and Intel itself.

The implications of Moore’s Second Law, as it continues grinding down, is that chip production becomes a national security issue.

Ever since Moore’s 1965 article came out, cynics have been trying to call a halt to Moore’s Law. As circuit lines get close together their distance can’t be measured, the cynics note. Every increased expense or shortfall in decreasing circuit size is seen to be evidence that the “Law” is “ending.”

Nature of Money, Nature of Man

When I wrote my “anti-Trump polemic” early this year I thought I was writing about politics.

It turns out I was writing an economics book.

I learned this while reading a biography of the late Jane Jacobs, best known for her fight against the “urban renewal” of Robert Moses. After that fight Jacobs moved to Toronto, becoming one of Canada’s most beloved intellectuals, and there she wrote an economics history book, Cities and the Wealth of Nations. 

In this book Jacobs identified cities, rather than farms, as the original source of wealth. It was cities that turned wheat into bread and beer. It is cities that transform everything.

True, as far as it goes. But how and why remained a mystery to Jacobs. The nature of money eluded her. It’s something my recent book explains by looking at American history and seeking what I first saw as political patterns in our national life, and later concluded were economic patterns.

The answers, in our time, strike at the nature of money, the nature of man, and why, even after Hurricanes Harvey and Irma, there remain people like John Stossel who continue to deny the reality of man-made climate change. 

Wealth, it turns out, is entirely man-made. This is more controversial than it seems. Politicians have always believed wealth to be a product of holding land, or of exploiting it. They see history as great men moving lesser men around like pawns on a chessboard. Social historians, by contrast, focus on the real lives of ordinary people. These are important, but they are no more relevant to economic history than land is.

Another View of the Carter Administration

It has been clear to me for years that the 2010s are, in many ways, a bizarre recapitulation of the 1970s.

I just didn’t know how much.

While the 1970s represented the rise of oil, the 2010s represent its twilight.

The 70s were marked by two key crises, in 1973 and 1979, during which supplies were cut and prices skyrocketed.

The 2010s have already seen one price collapse, in 2014. It is going to see another before the decade is out.

It is against this backdrop that I would like to revisit the administration of Jimmy Carter. This time, especially if you’re a liberal, try to imagine yourself in opposition.

This isn’t difficult for me, because I began the 1970s as a genuine conservative activist. My politics shifted left, slowly, during the decade, but I still voted for Gerald Ford in 1976, and still refused to support Carter in 1980. (Sorry, Jimmy.)

What conservatives saw during that decade was just what liberals see today, in reverse. In the 1970s conservatives saw a natural majority growing, with power tantalizingly out of reach. Democrats in 1977 held all branches of government, as Republicans do now, and were very optimistic about putting their program into motion.

Going on Offense

The best years of this century for Democrats were 2005 and 2006, when DNC chair Howard Dean initiated his “50-state strategy.”

The idea was simple. Democrats would fight everywhere, not just in blue states but in red ones as well. They would fight on every level, on local and state issues, even if they had no chance. But they would fight.

Dean, plus Katrina, combined to make 2006 the only mid-term election of this century where Democrats enjoyed an unalloyed triumph. This holds important lessons for today’s Democrats, and for their technology overlords.

First, it makes little sense to just complain, as they did during Trump’s Inauguration. You need to go on offense.

Bizarro Carter

What happened last night makes no sense unless you believe, as I do, in the life cycles of history. The only way to accept it and to fight it is through an understanding of economic determinism.

First, life cycles. People believe what they believe for a lifetime. It’s why a set of political assumptions, what I have called a Political Thesis, can hold people even after it no longer works. The Nixon Thesis of Conflict stopped working under George W. Bush, so Barack Obama was elected.

Obama was a Reaganesque figure at a time that called for someone who was more like Nixon. We needed someone who knew their enemies and would be ruthless against them. We should have nominated Hillary Clinton in 2008. Obama was too passive in the face of obstruction, too complex as people came to demand simple answers. He will be judged a failure until someone else makes him a success.

Where Tesla is Wrong

Let’s step away from politics for a week, maybe a year.

Let’s talk, again, about business, about technology and about the future.

Let’s talk about Tesla.

I like Tesla. Most business analysts don’t. But I admire Elon Musk. I even think he’s right to buy SolarCity.

But I think the namesake product has a limited runway. Here is why.

The story of the Tesla car is a three-legged stool.

• There’s the electric angle. Don’t just save the planet, but recycle energy from the Sun, through the battery. Just as important, deliver a car with far fewer moving parts, so it won’t wear out. An electric motor has very few moving parts. A Tesla car is basically a drivetrain. If you replace the batteries, keep the drivetrain maintained, and change things like tires and wiper blades you’re good.
• There’s the performance angle. The Tesla’s electric motor can deliver enormous power to the drivetrain quickly. Its “ludicrous speed” goes from zero to 60 in nothing flat. The sleek design screams sports car. This is a car that has always been compared to high-end luxury vehicles, or sport vehicles, and has won in that niche. It’s had to compete there to justify its price.
• There’s the self-driving angle. Musk promises that you can ignore the car in a few years, and for now just keep an eye on it as you go down the road under the control of your GPS. It will avoid collisions and go where you want it to go.

Hope in Transformations

While a lot of attention is being focused right now on self-driving cars, and what that might do to the millions of people (mostly men) who now make a middle-class living driving things and people around, there are two other transformations coming in the next decade that are just as important.

Education

I first began covering education technology 25 years ago, when I put my new daughter on my lap and let her play what was originally an MS-DOS game. She’s 28 now and her education turned out to be a lot like my own, with rote learning, boring teachers, anxious tests, and a complete failure by the education system to recognize what made her unique.

The reason, as I wrote over a decade ago, was the nature of PC technology. By the time a system was installed and the teachers trained to use it, it was obsolete. Multimedia, Windows, the Internet, more Windows, Macs. It worked fine if you were willing to put $1,000 per year into new equipment, but you can’t do that in most schools.

The cloud is really a game changer here. With cloud, software and updates are all done centrally, all at once, and propagate to all client devices at the same time. Even an iPad can last a kid several years, and the $250/year cost can replace textbooks, making it highly affordable. Most kids can now bring their own devices to “work” anyway, and now schoolwork can follow them home.

The battered education software industry, and the education establishment, have barely begun to come to grips with what this means. For one thing, it truly turns the process of education on its head. Now, it’s the computers that can present the information, and the computers that can test mastery, while it’s the teachers who need to be doing the drills, the homework. It’s summarized by a saying from back in the 1990s – out with the sage on the stage, in with the guide at the side.

Let’s face it. Teachers are different. Some are great at presenting stuff. Others aren’t so great. And the difference between the two can be dramatic, in terms of results. But now every kid can get the best presentation of the material, then rely on the teacher for things they don’t understand, like understanding exercises and mastering homework in the classroom, treating the material itself as something more akin to entertainment.

This is how you make science into play. Make the presentation a TV show, make the experiments into Mythbusters.

This part of the revolution is harder to bring to colleges. The curriculum isn’t as set there. But what’s going to happen, because of economic changes already mentioned, is that undergraduate education is going to become more akin to K-12 over time. Call it K-16. Most undergraduate courses are fairly standard. They can be taught just as K-12 classes can be. Which means colleges, in order to survive, will focus even more on research and graduate education, which is where the money is anyway.

By standardizing curricula, by using cloud to present it, by adding software to help teachers with drill, we really can deliver our grandkids the kind of educational service I once thought my kids were going to get. There is some political irony here, in that Democratic teachers’ unions are going to be a problem. But so are Republican school boards and parents’ groups, which are constantly seeking to dumb-down curricula so kids never hear anything the parents believe might make them think.

So the revolution will be messy, it will be sloppy, it will move faster in some places than in others, and it will be intensely political. But the education revolution will happen. The need dictates it, the technology allows it, and those that pursue the path will get better results for a lot less money.

Health

A recent family health scare made me very angry at the health care establishment. The resistance by doctors to technology has been total, and effective. Despite cloud, and despite tens of billions of dollars in sweet, sweet stimulus cash, doctors and hospitals still waste incredible amounts of money.

Every doctor we visited, over several months, had an enormous staff of clerks sitting behind terminals, telling computers to do things the computers could really do themselves, or that we could do if given a chance. Setting up appointments, handling referrals, moving test results back-and-forth, billing for insurance. Health care is run by angry clerks. But HL7 is a set of computer codes that doctors should be able to use themselves to tell insurers what they have done, and what they want to do. Insurance practices are increasingly standardized, and best practices are as well.  

Medicine represents 17% of U.S. GDP, and most of that money is wasted on routine office work, or on arguments between doctors and insurers, with the doctors’ resisting best practices or trying to pull some procedure, test, or fancy drug over the insurers’ eyes, and the insurers resisting, with patients in the middle, paying both sides’ lawyers.

Enough.

We have the tools, we have the standards, and we have the billing codes. It’s time to get all doctors onto hand-held pads, connected to clouds, through which they can deliver diagnoses, get test results, and deal with insurers directly. Those who don’t want to be part of the future should retire.

We know how this works.

One of the great fights of the last decade has been over primary care. Doctors fiercely resisted the Affordable Care Act, threatening to leave the field, telling all who would listen that patients would suffer, that there would not be enough primary care. They lied. There’s plenty of primary care, thanks to automation. Primary care doctors have been hauled down from their office towers and into storefronts, where they have become employees, supervisors of nurse-practitioners and physician assistants who do an increasing amount of the day-to-day patient interaction. Good.

The struggle now is to bring this new attitude up the chain, into the professions. The same companies that have achieved success on the Obamacare exchanges, and in Medicare and Medicaid contracting, are going to lead the way here. Increasingly facilities will be owned by those whose incentive is to save money, not spend it. That means better care of chronic conditions, more patient interaction with lower-skilled (but more humane) professionals, and more control over what procedures, tests and drugs are prescribed.

Insurers can either get with the program or go out of business. All the threats by United Healthcare and others to leave the Obamacare exchanges are so much hot air. All the big insurers are, in fact, creating new subsidiaries around the new business models, and those are going to dominate.

What does this mean?

For politicians and businesspeople this means there will be increasing pressure to find new things for people to do that make money. There need to be new business models for the environment, for infrastructure, and for personal services that make sense for both the people working and the people getting the help.

During the last half decade, we’ve seen a host of progress in the creation of careers in wellness, in food service, in pet care, and in mass customization. It does take more education to pursue these opportunities – unemployment among those with “just” a high school education remains at peak recession levels.

That’s what Trumpistan is all about. It’s about people without the skills of the future telling the world they want to get off. When they talk about wanting things to be like they were before, they’re talking about wanting economic friction, about economic waste, and about the opportunity to screw their fellow man (or woman) because they can.

This is a challenge. It’s also an opportunity. We need more educated people. We need breakthroughs in medicine, in renewable energy, in a host of things that require business models to make work.

The next decade is going to be a decade of business models, both public and private, aimed at solving big problems and giving our kids meaningful, rewarding careers that last a lifetime.