The Tell on what will happen in 2020 came in late July of 2019.
Trump’s most loyal lieutenants, attorney general William Barr and Treasury Secretary Stephen Mnuchin (far right), issued existential threats against the Cloud Czars. Under Trump’s orders.
The Cloud Czars, for those unfamiliar with my current work at InvestorPlace, are Microsoft, Amazon.Com, Google, Apple and Facebook. As technology has come to dominate the economy, the Czars have come to dominate technology.
They’re the Cloud Czars because the tool which dominates technology is cloud computing. It combines parallel processing with virtual operating systems and open source techniques to hold down costs.
Google was first to create cloud data centers, to run its search business. But Amazon was first to market, re-selling its capacity in 2006. Free and paid business models created cash flow which these companies used to scale operations.
Then came Facebook. In 2011, it committed to the cloud before it had the cash flow. It also formed the Open Compute Project to make cloud hardware cheaper to build, using the same sharing techniques as open source software. This turbocharged cloud development and let Facebook, practically a start-up, join the cloud ranks.
Microsoft and Apple finally joined the party in 2014 and 2016, to run businesses that already had enough cash flow for the investment. But no other American companies made the jump. IBM and AT&T prioritized their dividends. By 2019 the five companies that had made the investment in cloud were worth $4.5 trillion, an economic power unrivaled in the history of business.
In America, economic power eventually becomes political power. That’s because here we play by the Golden Rule. He who has the gold makes the rules. If you don’t someone else will, and they won’t have your interests at heart.
Opposition from the Carter Administration is why oil companies took control of our politics starting in 1980. Manufacturers took control after the banking failures of the early 1930s. That’s the way America works. Industries rise, opposition moves them to build political power. Voters accept their new overlords because they know how to make money.
It turns out George Washington Plunkitt was right. Reformers are only morning glories. Liberals are reformers by nature. We want power to help people. But who knows what helps people?
Making money helps people. Giant housing projects don’t help people. Neither do fast railroads, using old technology. Such things only help contractors and the politicians holding the contracts.
Economic leaders know what they’re doing, until they don’t, which happens when bigger industries emerge. A competitive market economy drives out stale solutions. A free society lets ideas be tested. A democratic system gives people the final word. The result is flexibility, required for a society to adapt to change.
Nothing has ever created a greater need for flexibility, or more rapid change, than Moore’s Law.
When new industries achieve economic leadership, politicians who stand against them are doomed. Jimmy Carter was doomed 40 years ago, because he chose the interests of manufacturers over those of the oil business. Herbert Hoover was doomed before that because he chose banks and utilities over manufacturing, which needs expanding markets. And so on.
And so on.
Back to Trump.
The attorney general launched a broad “antitrust probe” aimed at breaking up the Cloud Czars. The treasury secretary, a former board member of Sears, insisted that Amazon is “destroying retail.”
The charges are bogus. Free services made possible by the Czars ride on advertising. All free services, like broadcast TV, ride on advertising. The Czars’ collection of “personal data” has one purpose, to sell advertising. Google and Facebook stand accused of making a market.
Amazon hasn’t killed retailing. Amazon had made small retailing great again. Over half of Amazon’s sales are on behalf of third parties. Small companies, often with fewer than a half-dozen employees, piggy-back on Amazon’s cloud and delivery infrastructure to beat Walmart. It’s Walmart that destroyed retailing, Walmart that even destroyed Sears. Walmart remains, at this writing, twice as big as Amazon.
Split the clouds from their business models and you will turn the clouds into utilities. The companies that connect the clouds are organized as Real Estate Investment Trusts. They prioritize dividends and build assets with debt, not cash flow. Like AT&T and IBM. Utilities don’t invest ahead of demand, as the Cloud Czars do. They invest behind it.
Is that what we want? Do we really want to break up the leading edge of our market economy while China’s Cloud Emperors – Alibaba, TenCent and Baidu – take the market? That’s what is happening. Connecting the developing world to the world market has brought more people out of poverty than ever dreamt of before, over 1 billion in this century. Technology did that. The Cloud Czars did that. You want to hand that to China? You want to walk away from the biggest opportunity of our time, and hand it to our biggest rival?
Trump is taking on tech with brute political force. Some Democrats are joining the call, suspicious as always of any concentration of power. These Democrats are idiots, but the Cloud Czars can handle them.
That’s because the Cloud Cars are Democrats too.
Seattle, San Francisco, New York, Washington D.C. and Boston are Democratic. They’re where tech lives. They’re where it was born. They’re where it prospers. Democratic policies focus on growing human capital. Democrats support schools, and other policies that let minds fly free from worry. Spreading wealth increases the supply of free, trained, enthusiastic minds anxious to say and make new things. Such minds are what wealth is built on in the cloud era. A mind wasted is a smokestack rolling coal.
The dumbest thing I’ve heard this year is this idea that the Cloud Czars are helpless in the face of Trump’s threat to “do it again,” manipulating free services like Facebook, hacking voting machines, guaranteeing himself eternal power.
The Cloud Czars aren’t helpless. The global software industry employs millions of programmers. It can protect what it created. Trump and Putin have only a few thousand bad guys trying to hack the vote and public opinion. They’re outgunned.
Tech won’t come out of this struggle unscathed. Oil didn’t. Regulation is coming, regulation created in partnership with, the regulated. The process of getting involved with government in this way is inherently corrupting.
But breaking up the clouds, destroying trillions in value, giving China the future, that’s not going to happen. The Cloud Czars won’t let it happen.
