Trumponomics: focusing on weird things with a small staff

From The Economist a few weeks back:

The real difference is that Trumponomics (unlike, say, Reaganomics) is not an economic doctrine at all. It is best seen as a set of proposals put together by businessmen courtiers for their king. Mr Trump has listened to scores of executives, but there are barely any economists in the White House. His approach to the economy is born of a mindset where deals have winners and losers and where canny negotiators confound abstract principles. Call it boardroom capitalism.

And, on trade, where history points towards a more open approach being successful:

Contrary to the Trump team’s assertions, there is little evidence that either the global trading system or individual trade deals have been systematically biased against America. Instead, America’s trade deficit—Mr Trump’s main gauge of the unfairness of trade deals—is better understood as the gap between how much Americans save and how much they invest. The fine print of trade deals is all but irrelevant. Textbooks predict that Mr Trump’s plans to boost domestic investment will probably lead to larger trade deficits, as it did in the Reagan boom of the 1980s. If so, Mr Trump will either need to abandon his measure of fair trade or, more damagingly, try to curb deficits by using protectionist tariffs that will hurt growth and sow mistrust around the world.

Meanwhile, by the numbers, the focus is obviously on the wrong sectors for juicing:

A deeper problem is that Trumponomics draws on a blinkered view of America’s economy. Mr Trump and his advisers are obsessed with the effect of trade on manufacturing jobs, even though manufacturing employs only 8.5% of America’s workers and accounts for only 12% of GDP. Service industries barely seem to register. This blinds Trumponomics to today’s biggest economic worry: the turbulence being created by new technologies. Yet technology, not trade, is ravaging American retailing, an industry that employs more people than manufacturing. And economic nationalism will speed automation: firms unable to outsource jobs to Mexico will stay competitive by investing in machines at home. Productivity and profits may rise, but this may not help the less-skilled factory workers who Mr Trump claims are his priority.

Check out the rest: “Courting trouble”.

As Rome burns, there’s plenty of money investing in attention aggregation, innovation, and…burgers?

Let the Old Gods bellow and rage in the distance.There are likes to like and pages to page-view. Swipes to swipe. Items to be ordered and thought-leaders to be thought-followed. We’ve got our own temples, up in The Cloud, to be decorated with selfies and festooned with a million paeans to ourselves, our personal brands and our experiences. Our chauffeured chariots to be summoned, literally, on-demand. The app as finger-snap. People are favoriting us as we sleep. At least, they’d better be.Google is doing the work that priests and rabbis used to do. It has answers. Curious children are learning to consult with Alexa and Siri in kindergarten.And our New Gods have found a way to extract tribute from each and every one of these activities.We’re carrying their altars in our pockets.
“American Gods,” Josh Brown

There’s a quandary in there about why the market is up despite all the craziness in DC. The two reasons seem to be: (a.) in this craziness, customers of major companies are escaping into the comfort of the golden arches, Marriott(?), and iPhones, so, (b.) the Pareto minority who actually does all the investing goes to where the customers are going. For the investing group, there’s also some brand-driven devotion to big companies.

Sure: smoke ’em if you got ’em!

Owning half of all advertising is a good business

The Attention Merchants can fill in the gaps of how companies like Google and Facebook are doing so well here: they’re essentially gobbled up the advertising market, this life-blood of most all business, i.e.:

Information cannot be acted upon without attention and thus attention capture and information are essential to a functioning market economy, or indeed any competitive process, like an election (unknown candidates do not win). So as a technology for gaining access to the human mind, advertising can therefore serve a vital function, making markets, elections, and everything that depends on informed choice operate better, by telling us what we need to know about our choices, ideally in an objective fashion.

You could hang a figure on the value of that over 1, 5, 20, 50 years…but, let’s just say it’s a fuck-load lot of money and, thus, valuation in a company. Controlling what people, businesses, and governments spend their attention and money on? Priceless.

Good companies often have good products

Next, you can get the sense with this kind of talk that what’s being valued in companies is “nothing,” just a feeling, a sense. In reality, for example, with companies like Apple and, now, Amazon, long-term strategies (often risky) that result in cash-spewing machines is what’s being valued. The iPhone and it’s software makes a ton of money; AWS throws off cash.

Google has an 88 per cent market share in search advertising. Facebook (including Instagram, Messenger and WhatsApp) controls more than 70 per cent of social media on mobile devices. “Silicon Valley has too much power,” Rana Foroohar

In the pure “dot.com” category, it’s easy to get beguiled and think that “likes” and baby pictures in Facebook, or putting dog-faces on teens, is the thing being valued. Of course they’re not, people’s attention and the ability to keep those people paying attention (“a culture of innovation”) is what’s valued. Advertising is what’s being valued, not whatever “social” is.

Trading on perception…which is built by good products

Now, I don’t actually know how investing works – I’m one of those hoards of Vanguard-drones – but it’s clear that all the interesting stuff is based on predictions about how other buyers will price/value a share. You can sit around and collect dividends (or wait for a company to be bought by another) as your “payout” in equity investing, but that seems to be the boring game (unless you’re an “activist” investor who hype-engineers those two). So, of course, paying attention to people’s perception of a company’s value is what the investing insiders get all worked up about.

But, again, if you look at “the new gods,” most of the companies have actual, valuable businesses. I can speak to the tech companies like Apple, Amazon, Google, and (a bit) Salesforce. They have good things to sell and good strategies backing them.

Netflix, for example

Netflix, which is on the list of “new gods,” is another example. First, it was a better mouse-trap to browse for DVDs online, queue up ones to get, and have them mailed to you rather than going to the rental store. Then, as streaming became technically possible (queue those endless Mary Meeker decks), simply doing that was better than living at the whim of cable companies that seemed like they were over-serving and over-charging. (And meanwhile, TiVo just sort of shit-the-bed on their go at this market-window – maybe the cable companies gleefully starved TiVo with their own DVRs and lack of partnerships).

And, once all of Netflix’s customers had watched that 5% of the streaming catalog that was actually good (I kid! I kid! It’s probably more like 15%, right?), Netflix had to make it’s own original content (and put in exclusive licensing deals). In each round, they had a good product and re-arranged their strategy accordingly (and sometimes it didn’t go well).

(If I knew this industry better, I’d know if my hunch that HBO is the Microsoft here [“fast follower” who was sort of there the whole time with a good product and even evolving, just not getting the glory] was helpful or not.)

“Old Gods” fall


HP(E) and IBM are negative examples here, and Microsoft provides a more positive example. For a long, long time, both HP and IBM were perceived as being rock-solid – their products and services were trusted, worked well, and, thus, were purchased a lot. (I’ll spare you the old IBM adage.)

They had good businesses. But over the past 10 (or even 15) years, each fell behind the times, seemingly willingly: they didn’t evolve their business model, product portfolios, and corporate strategies fast enough. They didn’t change quickly enough, and the worse mistake was that they didn’t realize they needed to change faster and, then, that management didn’t make it happen. HP had got hit up with The Curse of Most M&A Doesn’t Work, But Some of it Really Doesn’t work. In each case, the financials of the company suffered, and so did everyone’s perception of the company.

The point with HP and IBM is: in large, older tech companies you need not only a good product, but you need to a good everything.

Microsoft’s rebirth

Microsoft shows that you can turn that around, and adds more confusion to how investors actually value companies. From what I know, Microsoft has always been a financially good company, but it languished starting in the Internet era, which it barely battled through (to much financial glory after the late 90s).


But as it continued to biff on mobile, SaaS, shoring up desktop sales (I might be wrong on this point), and even cloud (where it’s now considered one of the “top three”), the perception was that Microsoft had lost it, strategically. An early warning sign was screwing up the Danger acquisition, which was a prelude to whatever Nokia was. And, I always found Bing to be overly quixotic: why try? But, really, I suppose you’d want to try to go after that pool of “priceless” advertising money above that Google and Facebook now steel-fist, and analysts would have discounted Microsoft’s share price even more if they didn’t try for a slice of that TAM-pie.

Despite all that, Microsoft seems to have turned it around. Their perception is pretty good now, and they’re out of that share-price plateau of the 2000’s. And, again, what did they do? They made good products, they built a good business, they changed almost everything.

Luck is handy too

You can throw more negative and positive examples on the pile: Yahoo!, how SUSE blossomed after it go out from Novell’s thumb, how AOL lost its way (though, maybe that’s getting better?), SAP & Oracle (deciding which and how each is good or bad is left as an exercise to the reader), etc.

In each case, companies just have to do the simple thing of trying to build a good business, make good products and services, and, well, catch a substantial stream of lucky breaks.

Since I don’t know burgers, payments, and hotels, I can only assume that in Josh’s list of new gods, McDonald’s, Visa, and Marriott are following a similar, annoyingly common sense approach.

Gods become “old god” because they suck versus the new gods

To hop on the American Gods metaphor train, sure, some of the old gods fell into disfavor out of whim (Johnny Appleseed don’t seem half-bad, and Easter seems pretty nice!), but most of them were dumped because they were shitty: blood sacrifice, mind-control, and otherwise treating humans like shit sure seem like a raw deal compared to TV, free-market-money, Jesus, and Paul Bunyan. The old gods stopped trying to innovate, as it were, and got all stuck on hammering in people’s heads, child sacrifice, and hanging humans.

That shit don’t sell now-a-days. So, you know, like the doctor says: don’t do that.

Meanwhile, back to the point

So, still, why’s the money-hole going so well?

You’re wondering how it could be possible that the S&P 500, the Nasdaq 100 and the Dow Jones Industrial Average could be climbing to record highs day after day, given, well, everything.
How is it that stocks can break through to new heights while the country at large seemingly sinks to new depths?

Who really knows why “the market” is “up” when it should be “troubled,”. In general, the way companies are valued and the way businesses run doesn’t seem effected much by cultural strife, change, and, chaos (in the short to medium term, at least). So, if the ruling hill-billy class wants to make a big to-do out of bathrooms, what does “god money” care? If anything, money likes contained chaos, constant change that makes cash turn over and change hands.

Also, of course, Republicans are in power, which makes money-focused people hopeful for tax reductions, repatriation, regulation reduction, and things that are otherwise the opposite of “Democrats wanting to use money to help poor people.” Most investor class people seem to stop reading that sentence after the word “money.”

Finally, you can’t exactly trust anything that Trump and friends say – sure, that 35% border tax would tank huge sectors of the economy, but come on, he’s caved on so many other things…well, actual important, money-related things (though, hey, how am I going to do my pivot tables if I can’t use my laptop on the way back from Zurich?)

There’s an argument to be made that if people can’t maintain steadily, growing salaries, there won’t be enough consumer money sloshing around to spend on things …but if ‘400 wealthiest Americans had “more wealth than half of all Americans combined,”‘ what do they need that other half for but to packaged up their prepared meals and old-man groaning mattresses to be drone delivered?

More, how much influence does the social chaos of state and local government really effect “the market,” and Congress doesn’t seem to actually do anything (nor want to), and we’ve got a little under two years until the next gut-wrenching election night – what if we elect more crazies, but this time they can actually get shit done?!

Don’t worry, though! There’s plenty of time to order five gallon tubs of guacamole and wrastle with (and for) carnies into the office!

Which is to say: in politics, so far, there hasn’t been much more than talk about money. It’s all been able people and culture. Investors don’t invest in people and culture (maybe they use their own cash to buy expensive art, sure), so why should the market be down?

“Give us your passwords, foreigner” – DHS mulls password collection at borders

Kelly noted that while this was “still a work in progress” and not necessarily “what we’re going to do right now,” he added that President Donald Trump’s freeze on entry to the U.S. by citizens of seven countries, “is giving us an opportunity… to get more serious than we have been about how we look at people coming into the United States.”

“These are the things we’re thinking about,” he said. “We can ask them for this kind of information, and if they truly want to come into America, then they’ll cooperate. If not, you know, next in line.”

It’s be nice to find the exact back and forth, somewhere in this five and half hour Home Security Committee video.

Also, it’s further in the “life becoming more like Black Mirror” vein. Recall that episode where people are required to review all their memories when they cross borders and enter airports.

Source: “DHS mulls password collection at borders.”

6 page memos for meetings? Hold my beer. How ’bout 9 bullet points?

The commander in chief doesn’t like to read long memos, a White House aide who asked to remain unnamed told The Huffington Post. So preferably they must be no more than a single page. They must have bullet points but not more than nine per page.

Source: “Leaks Suggest Trump’s Own Team Is Alarmed By His Conduct”

NYTimes ads 276k subscribers in Q4, now at 1.6m

the NYT added 276,000 net subscribers to its news products during the fourth quarter, finishing the year with 1.6 million. The Times called it “the single best quarter since 2011, the year the pay model launched.”

I’m one of those subscribers. I have to say, the editorial culling and feeling of completeness when I scroll through the stories in the app is nice. I wish they would fill out their categories more: they don’t have much content compared to how much I read each day.

Link

Cash repatriation could inject $850bn, post-tax

If Congress enacted such a deal, of course, only a fraction of the $2.6 trillion would reach shareholders. It’s important to note that much of the UFE is not actually in cash; it’s invested in overseas plants or provides working capital for foreign subsidiaries. At press time, specifics of a plan hadn’t emerged, and figuring out which assets will ultimately get taxed, and at what rate, will be thorny. But based on Trump’s earlier proposal and on past holidays, investing pros estimate that about 40% of the UFE, or around $1 trillion, will come back to the U.S.—and that companies would net at least $850 billion after taxes.

Tech and health care companies would get most of that.


I think most people believe that cash would be used in stock buybacks and dividend to raise share prices and give cash to investors. Trump would probably want it for creating new jobs, and it could be used for domestic acquisitions.

See the rest from Shawn Tully at Fortune.

Highlights from that Thiel/Trump piece

One could have predicted Mr. Thiel’s affinity for Mr. Trump by reading his 2014 book, “Zero to One,” in which he offers three prongs of his philosophy: 1) It is better to risk boldness than triviality. 2) A bad plan is better than no plan. 3) Sales matter just as much as product.

Some Rumsfeldian level poetry…except the Rumsfeld one was easier to decide:

When I ask about the incestuous amplification of the Facebook news feed, he muses: “There’s nobody you know who knows anybody. There’s nobody you know who knows anybody who knows anybody, ad infinitum.”

Avoiding being all rainbows:

“If you’re too optimistic, it sounds like you’re out of touch,” he says. “The Republicans needed a far more pessimistic candidate. Somehow, what was unusual about Trump is, he was very pessimistic but it still had an energizing aspect to it.”

What exactly do they do?

“One of the things that’s striking about talking to people who are politically working in D.C. is, it’s so hard to tell what any of them actually do,” he says. “It’s a sort of place where people measure input, not output. You have a 15-minute monologue describing a 15-page résumé, starting in seventh grade.”

Source: Peter Thiel, Trump’s Tech Pal, Explains Himself

Snarkily summarizing Trump’s press conference

But the questions kept coming back to Russia, and to the ways that its bad behavior was really all Hillary Clinton’s fault. He mocked her for having travelled to Russia, when she was Secretary of State, with a red plastic “Reset” button as a prop. “There’s no reset button,” Trump said. “We’re either going to get along or we’re not.” He was talking about Putin. But watching Trump on Wednesday was a reminder that, after an ugly campaign, there are no reset buttons to be found at Trump Tower, either, not even ones painted gold. And in nine days Trump moves into the White House.

Some fine tone while at the same time summarizing the highlights.

Link

TrumpTech: If the rocket scientists can do it cheaper, surely IT can too

Boeing and Lockheed were already worried about their costs long before the election. If I were the United Space Alliance, I would be even more terrified of the danger of losing government business now. And those of us in federal IT need to realize that our time may be around the corner.

As we discussed in the 2017 predictions show last month, the Trump adminstration is clearly not reliable in it’s agenda or principals for any reliable, let alone logical, predictions. Cutting spending in favor of “non-traditional” options, though, seems like something they’d goof into.

Link

TrumpTech – survey on Joe Six Pack’s sentiment, telco predictions

I didn’t check the legit’ness of the survey, but:

When it comes to tech priorities for the next four years, the general public doesn’t have the same agenda as tech leaders. For example, only 8% of the general public cares about the Internet of Things and only 5% sees 5G development as a priority. STEM education is only a priority for 13%.

What they do care about is security and hacking, particularly of government data (43%) and consumer data (38%). So if Trump’s administration does come into conflict with the social media and cloud giants, he’s going in with the public’s backing.

There’s no majority belief among either the tech elites or the general public that Trump will make the tech industry more innovative than before (42% and 39% respectively). Among the general public, the largest percentage believes that no change is the most likely option (40%), while more tech elites than Joe Six Packs fear stagnation (28% v 21%).

And, labor-wise:

Some 37% of the general public sees technology as a job destroyer for the average American. The sector is accused of bringing in foreign workers to the US by 70% of the general public and of shipping jobs overseas by 60%. (To be fair, the tech elites go along with these two conclusions!) Over half of the general public (56%) believe that US citizens should be given preference for tech jobs.

Meanwhile, one of the outgoing administrators says there’s plenty of tech jobs, just not qualified candidates:

These efforts will founder if there isn’t a continuing supply of qualified recruits, so next up is to increase access to high-quality science, technology, engineering and mathematics (STEM) education. Underlying the importance of education, the OST noted that more than 600,000 high-paying tech jobs went unfilled in the U.S. in 2015, and the number has only grown since.

See also another outgoing letter that encourages continuing programs that ease IT procurement and shared, cloud services like cloud.gov. Seeing how the Truml administrators treat those programs will be a key litmus test. As I alluded to yesterday, these types of programs seem like ideal “do more with less”/”copy the private sector” programs that fit into Trump’s campaign rhetoric. But, hey: hypocracy ¯_(ツ)_/¯

Telco M&A and regulations

Also, see this extensive net-neutrality/telco prediction piece from Caroline Craig.  With more from 451, if you have access

Despite a very activist FCC under President Barack Obama and Wheeler – resulting in stringent net-neutrality and privacy rules, and a pro-competitive view of mergers and acquisitions – US telecom operators recently have been more than willing to push the envelope. Multiple operators have experimented aggressively with zero-rating. Verizon, in particular, has explored the edges of consumer privacy – from its so-called (and abandoned) ‘super cookie’ effort to its ongoing emphasis on mobile advertising, including customer-data-driven ad targeting. While some industry M&A has stalled, AT&T’s surprising bid for Time Warner pushed the boundaries of vertical integration. A Trump administration looks to be much more hands-off, likely accelerating industry M&A and encouraging telecom providers to experiment freely, with the forces of the competitive market (rather than regulators) reining in anti-consumer oversteps. As the mobile market is now constituted – with four highly competitive wireless operators and a slew of cable operators and other disruptors (e.g., Google and new IoT upstarts) ready to leap in – we’re okay with that. No one wants an anti-competitive industry structure or to see consumer privacy exploited, but overly harsh limits can be destructive, too. It’s up to mobile and broadband operators to not abuse their likely new freedoms, and up to their customers (and regulators) to punish them if they do.

Bonus! check out the huge uptick in digital advertising spend this cycle:

As a matter of fact, digital media spending for 2016 political campaigns was projected to top $1 billion, contributing 9.8 percent of media spend. Comparatively, digital spending during the last presidential election season in 2012 was $160 million. 

Link