Silicon Valley: Have you lost your way? A view of the valley from a Luddite

Alternate title:Silicon valley or silly-con valley?

As silicon valley enters its 5th decade, it is interesting to look at the path of innovation of silicon valley and what has worked and what branches of the “innovation tree” have been, well let's say, a detour.

The main trunk of the innovation tree has been the semiconductor.  The breathtaking innovation that has taken place in the semiconductor industry has been nothing but astonishing.  That innovation continues today.  NANDflash, 3D disk storage geometries are just some recent examples.

The move into computers was also incredibly innovative.  Apple, while not always a commercial success until much later, pioneered PC design, and later music, phones, pads, and, well perhaps watches.  (We'll reserve comment on that last one).

Then in the 90’s came Google who disrupted advertising and created enormous value for advertisers, consumers, and Google shareholders.  As in the cases above, significant economic progress was achieved.

But, silicon value has another branch to the innovation tree, one where fantasy value creation has replaced true innovation.  For example, startups which have taken the “offline” world and tried to bring them into the virtual world.  This branch is of a significantly different character.  Instead of creating economic value for shareholders, it has in the end been a transfer of wealth from shareholders to consumers.  And when this transfer ends, the company has no value and usually ceases to exist.  This is consistent with economic theory: where there is no innovation, there is no value.

Indeed, there is no innovation in companies of these ilk.  There have been many of these “on-liners”, but the poster child for them are companies such as Amazon, Tesla, Uber, Handy, Task rabbit,  and the numerous other “unicorns” (at least the ones who haven't gone bankrupt by time you read this). 

Let’s take Amazon, which has the longest track record.  There is little innovation in catalog retailing, a concept that has been around for decades.  The innovation is really the concept of getting investors to fund a transfer of wealth to consumers by rolling a truck to their door to deliver toothpaste.  How can that possibly be called innovation?  How can that possibly be economical?  When drones do it, maybe, but you could have sent the drone from your nearest Walmart.  Amazon, 20 years on, has made very little money for shareholders of course, as economic theory would have foretold.  In the end, after this 20 years, all we have done is shifted capital from Mom-and-pop to the management of Amazon, who, has in turn built rocket ships for their amusement.  Hardly comparable or recognizable to the silicon valley pioneers.  Bob Noyce should roll in his grave!

Uber is another example.  Yet to make money, and their innovation ultimately is an “app”.  Shame on taxi companies for not thinking of this, but in the end we just moved capital from unwitting livery companies to a small few in silicon valley.  Darwinism is key to our economy but this amounts to foolish shareholders funding a non-productive enterprise.  I fear they will get what they deserve in creating the world’s most expensive taxi app.

I fear some of the detours of the silicon valley innovation engine have run into a ditch.  Ultimately, the same Darwinistic forces that shifted this wealth around will shift it again.  I welcome that so we can get silicon valley back on the road.  Biotech anyone?

Health care expansion

As someone who will be asked to pay tens of thousands of dollars more on their taxes, I need to make some points about this healthcare bill:

1) This is not "reform" this is "expansion" funded by high earners, who will likely just give less to charity, since they are directly funding healthcare premiums for others less fortunate

2) #1 would be OK, if others were asked to make the "shared sacrifices" that lured me into voting for Obama (I was so naive). I don't see any sacrifices for any other cohort: cadillac plans for unions are intact, no tort reform, lower earners will get more and are not asked to pay a dime. We're not even scaling back our ridiculous and destructive wars!

3) This bends the cost curve upwards: premiums will go up right away to cover the increased burden by health insurers, and medical device makers will pass their costs on right away to patients and insurers.

4) This is not deficit neutral; the CBO scores what congress says it will do, not what it is likely to do. Example: the doc "fix" which passes every year, and costs $100's of billions. So, add on higher taxes down the road

5) There will be a loss of jobs because our healthcare costs will cause our labor costs to be uncompetitive

Thanks, Democrats, for the bait and switch; you will never get my vote again.

Maybe I'll be wrong. That would be terrific. I'm not counting on that.

Letter to the NY Times

I read your op-ed, "The Case for Reform", 12/30/09. I disagree with your conclusion that this bill should be passed and instead urge Congress to start again and forge a true reform bill. In the end, this bill is not a reform bill, it simply extends a broken system to 30 million new people without paying for it.

Your op-ed is void of any cursory analysis. Consider some of the key points in your op-ed:

1) "The fact that 46 million people in this country have no health insurance should be intolerable".

My response: I think most Americans agree; this is not controversial.

2) You state that the reform bill won't cut costs, but will pilot some projects that will attempt. "No one yet has the answer".

My response: That is an egregiously false statement! Plenty of tried and true reforms exist that can be implemented now, but are not. We will lose our opportunity to implement them. Among the reforms: tort reform, cost sharing, cross-state competition

3) "the C.B.O. says that the reform bills are paid for over the next 10 years and would actually reduce future deficits"

My response: Any rational person knows this not be be a true statement. It is true that the CBO states this, but the CBO by law can only consider:

a) the next 10 years, and since the reforms are delayed 3 years, we get 3 years of taxes but no outlays. If they estimated the 10 years starting in 3 years, then it would cost plenty.

b) the current law without the doctor "fix". As you know, the doctor fix is passed every year by congress (else risk mutiny by doctors), but yet does not make it into the CBO estimates since they cannot consider likely changes to the law. This cost is at least $250.

c) The cost saves from the independent commission are subject to a Congressional veto, as you state. Anything unpopular will be vetoed, so any significant reform will be politicized and vetoed. No cost saves will make it (unless they impact non-voters only).

In short, any sane, independent-minded person would not call this bill cost neutral (or better). You risk your credibility when you state that.

I don't know why "left-leaning" people defend this bill when meaningful reforms exist. I know why left-leaning politicians do, as this bill is designed for political wins.

It reminds me of several years ago when I wrote to the WSJ to beg their friends in Congress to oppose the Iraq invasion. This bill, like the Iraq invasion, is a dereliction of duty for the mainstream media for not being up in arms over the sell-out by politicians to lobbyists.

Thank you

How we eat: the root of most evil

While on the topic of Heathcare reform, it is related to another topic that I feel very passionate about. The way we eat.

Simply put, the way we eat is unhealthful, inhumane, and unsustainable.

Unhealthful: it's well documented by Michael Pollan and the like that we need to eat food, mostly plants, and not too much. Processed foods, meat, etc cause diabetes and cancer. This is well documented and proven so I won't bother here. In short, eat plants and seeds and nuts. And some fish.

Inhumane: Factory farming is well documented to cause misery to billions of animals each year.

Unsustainable: we simply can't keep eating like this. The green/global warming people are way misguided. The real culprit is our food (esp meat production which drives corn production) that causes the problems we have now. The Meatless Monday campaign says that if we cut out meat on Mondays, that would do more for global warming than giving everyone in the US a hybrid car.

So, I see our food system at the root of most of the evil in America: our health crisis, our environmental crisis, and, by extension, our disastrous energy and defense policy

Dear American Citizen: you need to fix this, do NOT rely on the government. Eat Plants.

Heath Care Reform

Regarding the healthcare reform debate, it seems a moderate, reform-minded approach is being overlooked, in favor of populist ideas which could end up in disaster and unintended consequences (namely, hurting those we are trying to help).

There are certain facts, which seem to me irrefutable:

1) We spend too much on "preventative" measures, such as unnecessary tests which are the basis of healthcare inflation over the past 15 years

2) Covering the 40MM uninsured at the same level that medicare or private plans cover people now, will put this country into debt beyond a level that can be tolerated (CBO estimates $2T). This risks collapse of our economy.

3) True prevention, such as exercise and diet are the only cost effective approaches that are proven to work. They are the true win-win.

4) One can squeeze the drug companies (who are headed for generics anyways) and the insurance companies (who will just exit the business), but that doesn't solve the problem. Those numbers are minor in the scheme of what we try to accomplish

The implications seem clear to me, as a matter of common sense, but do not seem to be part of any of the reform bill:

1) Adjusting cost based on on a patient's health and therefore, cost to the system. Data shows that as patients have to bear the costs of their actions, they will behave better. Pres Obama speaks of "responsibility", but there's no action there. To allow people to run up tests for "free" seems like a recipe for what we have now!

2) If Medicare is insolvent, why would any other government system be expected to work better? Any true reform needs to reform the process, as in #1

An Open Letter to Mr. and Mrs. America

Dear Mr and Mrs America:

You don't look so good. You're overweight, and you spend too much for your own good. Everyone likes to pig out every once in a while, but come on! You can't feel very good physically, which translates into a bad mental state, I'm sure. Also, if you stop buying everything, you'll feel better. You just look so stressed out that you have to keep stimulating yourself through food and material goods - it looks tiring to me. What a merry-go-round! You don't have any time to think - no wonder you look to the media to tell you what you should think. No wonder we have such bad leadership with confused values, morals, religion, politics, policy all intertwined. You are the most powerful people in the world - you get to vote for the leader of the free world - we need you to slow down! Do some thinking for all of our sakes!

Some suggestions:
1) Debt - don't do it. Pay down your debt, even your mortgage, and build for retirement. See Ben Stein's writings on the topic. Do you want to live well? Less is more - don't spend and you won't need, and if you don't need, you'll have more to save for later. Next time you're in the store, ask yourself if you really need anything -- you really don't need a new SUV! Just go cold turkey, you'll feel free! That will bring financial freedom, which will reduce your stress and your need to eat so much.

2) When your stress is reduced, you should eat better, meditate, and work out. You should eat fruits, nuts (esp. almonds), a variety vegetables, whole grains (esp. flaxseed), legumes, and soy. Include some complex carbohydrates such as rice and pasta. Meat, except for fish, is not necessary, and on-balance, probably not healthy or environmentally friendly. Eat fish, especially salmon, mackerel, and eel for omega 3’s and vitamin D. Use olive oil or flaxseed oil only. Yogurt smoothies are a good filler, and can be a meal substitute. Try this: only eat fruit before noon. The world wants you to think you need more than this: more protein, more dairy, more meat. You don't. It's true, check the objective scientific literature. Longevity is linked to eating less, esp. less meat.

When you slow down, eat better, and work out, that will be good for you. You'll think clearer too and get yourself into much less trouble. That will be good for the world.

Issue #2 - Economic Policy

Follows are the economic policies I believe in. These are simple, but often ignored by policy makers. It's amazing that even a so-called "conservative" administration like ours, with a supposed "mandate from the people" can't override special interests to implement these policies. But, I guess the non-Clinton democrats would be worse on this, so I can't complain too much.

1) Free trade - just do it. Everyone is better off. Please see your Economics 101 textbook. To the Bush Admin: stop being a major offender! Lead by example. Eliminate tariffs - you won the election!

2) Reform social security. Hate to admit it, but the Bushies have this one right. Democrats would be wise to stop obstructing this one and get behind it. The concerns the Dems put up on this are laughable. Read Professor Thaler's work on how to incentivize rationale and sound long term investment behavior.

3) Reduce the deficit. Ugh. The Bushies really did us in on this one. Horrible fiscal policy. I understand the need for tax relief, not to run a surplus, etc. so I know where they were coming from. But, they went a way overboard and now we (more specifically, our children and lower income class) have a real problem. Can't argue that this one was politically motivated by Bush's rich friends. That's just bourne out by the facts.

4) Flat tax. Again, hate to admit it, but the Bushies are onto something. The devil's in the details, no doubt, but the Dems could actually be constructive here and get behind it to make sure it's done fairly.

Issue #1 - Iraq War

Just to get this out of the way, my view of the Iraq War is that it is a serious mistake that has already caused irreversible damage to America's image and has betrayed this country's values and military rank-and-file. It is a failure of government at the highest levels: namely the President and Congress. Where was the Senate when the war was authorized? It was obviously a fabricated cause (even at the time it was obvious). This huge outlay of money would be well spent reducing the deficit. We should hold the administration accountable for the waste of human life and money being spent.

This is not a "liberal" viewpoint. This is common sense, backed up by data. We have spent money and lives and have, on balance, increased the amount of violence in the world. Why the conservatives are not outraged about this is a testament to their greed - they seem to give the administration a pass on this so long as they get their other agenda items addressed. Where is their integrity?

There, I said my peace and can now move on to other issues.

Below is my letter to the Economist before the War was initiated. I also sent it to my Senators to warn them that they are asleep at the switch.

Letter To Economist, Oct 2002.

First Post - First Idea

Why don't we forgo the upcoming Presidential inauguration and instead donate that money to the tsunami relief organizations ? I believe we will spend $40MM on the inauguration. That money will be better spent on helping those in need. Who needs an inauguration for a sitting President? What a wonderful message it would send to the world about America's heart.