5X CAFE, Five Times Current
This is an odd format for an investment
article. It is formatted so investors can talk to politicians and
bureaucrats about creating free markets in power generation and
transportation infrastructure. With free markets we stand a
- Change the lifeblood of the US economy from oil
- Strengthen employment by putting people to work
re-tooling transportation and power generation.
- Strengthen the dollar based on America’s
energy self-reliance, strong agricultural base and rebuilding the
manufacturing base with infrastructure re-tooling.
- Constrain inflation by preempting exposure to
escalating and uncertain petroleum supplies.
- Increase income, as the US becomes the leader
in sustainable infrastructure exports.
In the mobilization for World War I,
communications infrastructure was monopolized for security
reasons. The belief in “natural monopolies” for
infrastructure expanded from communications into transportation and
power generation. For a nearly century we locked in place and
protected from competition the great advances of Bell, Ford and Edison.
In 1984 communications infrastructure was
de-monopolized exposing the rotary phone and analog network of Bell to
competition. Investment, creative and production opportunities
resulted. De-monopolizing power generation and transportation
infrastructure will expose to competition trillions of dollars of costs
that are 69-96% inefficient.
This graph from Livermore Nation Lab shows sources
and uses of energy. At the top is power generation at 69%
inefficiency. At the bottom is transportation at 80% inefficiency.
Transportation’s 20% efficiency assumes
moving a ton to move a person is necessary. If this assumption is
challenged, then current urban transportation is less than 4%
efficient. Cars at rush hour typically get 10-25 miles per gallon
of fuel. CSX Railroad is currently running a TV commercial where
they show a Prius being loaded on a rail car and state the can
“move a ton 423 miles on a gallon of fuel.” In four
billion of the eight billion miles Americans drive daily, about 70% of
current costs can be recovered as profit.
Besides the spectacular improvements in
communications after de-monopolization, there are other great examples
of free markets in power generation and transportation.
Power Generation Example.
Germany, the size of two mid-western states and
the latitude of Winnipeg, Canada has more installed solar collectors
than the entire United States. Why? Herman Scheer and the
German Parliament implemented free market policies in power
generation. If a German wants to invest her capital building
renewable power generation, she can take the capital risk and sell her
excess power to the grid at a profit.
Here is a graph showing the growth in jobs and
exports caused by implementing free markets in German power generation:
Unlike the regulatory monopoly of the US power
generation, Germany allows the risk/reward of private capital.
Several states in the US are considering adopting the German Feed-In
The Wright Brothers did not invent flight under
government contract. Henry Ford was a mechanically gifted farm
kid who democratized the car. The Transcontinental Railroads were
built with private risk. Incentives can help. Subsidies
confuse costs that should be attacked.
Creating a Free Market
How do you tell a politician we need the
transportation equivalent of the laser, personal computer, MySpace,
Google, penicillin, vulcanization of rubber, etc…. In my
conversation they ask, “If we give you a free market, what are
you going to invent?” That is like asking your father
before you were conceived, “What will your child do for a
living?” Like your father, we need to make a few billion
trys and every now and again, we’ll get lucky.
Inventors driven by passion, married to private
capital, hunting outlier returns from taking outlier risks is a free
market to create breakthroughs. We need to tinker and get
lucky. Edison proudly stated he found thousands of ways not to
make a light bulb.
Politicians, bureaucrats and academics do not take
outlier risks. Do you know any politician whose personal profile
lists the patents they have filed? Following is a resolution you
can ask politicians to support to create a free market in sustainable
infrastructure. It is adapted from Governor
Schwarzenegger’s Hydrogen Highway Executive Order. It is
not intended to be technology specific.
Getting action from politicians requires talking
to them in a format they use in their business. The hope is that
if enough investors send this or something like this to their
politicians, we will create a free market. We might get lucky and
change the lifeblood of our economy from oil to ingenuity.
Outlier efforts will result in outlier returns.