HOME  -   TECHNOLOGY  -   CONTACT  -  

 

 

Build Your Economic Lifeboat, After 2010 You Will Have to Swim

 

Ripping Sound

If we were on the Titanic, in May of 2005 we would have heard the iceberg ripping an unrecoverable hole in the side of our economy. Peak Oil, a geologically slow event impacted because of willful neglect.

Peaking Oil has caused the normally yearly price cycle of oil to break into a climbing spiral. Inventories, buffers against price spikes, are dropping radically.

Build a lifeboat

In times of uncertainty, self-reliance becomes critical. Here are my recommendations for policies:

 

 

 

Changing America's Economic Lifeblood from Cheap Oil to Ingenuity

 

Cheap Oil is Gone Forever

Based upon the presumption that secure access to cheap oil will always be available, America's economy, our jobs, shifted over the last 70 years from self-reliance into dependence.  The myth of cheap secure oil is gone forever.  Politics, decreasing supply and/or expanding demand will erratically push oil prices more and more unstable.

 

Demand is overtaking supply as the populations and economies of China and India grow and modernize.  Storms or politics could disrupt supplies any time.  Worse, Peak Oil is most likely in 2011; 54 of the 65 largest oil-producing countries have peaked and oil production is now in decline.  The tripling of oil prices between 2000 and 2006 is a strong indicator that demand is pushing against supply and/or oil has peaked and availability will soon begin a relentless decline.  Production follows discovery; discovery of new oil peaked in 1961 and has relentlessly declining ever since. 

 

Regardless of cause, increase demand or supply shortage, the age of cheap oil is gone forever and our economy is coasting on the last momentum of the cheap oil era:

-       www.gao.gov Report 07-283  GAO report on Peak Oil

-       Web cast documentary 

 

We have 2 years, maybe 3, to accept that cheap oil is gone.  It is time to channel the current momentum in our economy from dependence on cheap oil to innovation and invent a better future.

 

There is plenty of room to adjust.  For example about 4 billion of the 8 billion miles Americans drive every day are highly repetitive.  Yet we use energy and create congestion moving a ton to move a person.  There are alternatives to rush hours.  An example, PRT saves 90%-95% of the energy used by cars and trains, eliminates the congestion and saves 27 cents and 1 pound of CO2 per passenger mile.  If we act while there is momentum in our current economy, ingenuity can preempt waste.  Harvesting profits can fund the shift.

 

Up-Side-Down Pyramid

An Up-Side-Down Pyramid model of the economy illustrates how each of us scrambles to find a niche and make a living.  We live by adding more value than we consume.  Allowing individual ingenuity to profit from changing circumstance and encouraging everyone to leverage their talents to reinforce innovation creates a dynamic economy.  As schooling fish churn (synchronized motion), as each individual adjusts to societal pressure changes.  The entire school shifts as if guided by a single mind.  A free economy transforms as individuals adjust to new values and react to costs.

 

The same model indicates that if our economy is rigid, if individuals are delayed in acting, churn stops.  The entire economy becomes brittle.  When impacted by change, the entire structure collapses.  The 10 worst famines of the 20th Century happened when social structure collapsed leaving people without trust or transport; most resulted from government policies.

 

Nature of an Economy

The economy is a confederation of upside-down pyramids.

 

Natural resources

-  Life depends on nature; clean air, clean water, sun light, earth, ecological building blocks from which we fabricate our living, our social and economic structures.

 

Individuals

-  The economy is a confederation of working individuals who profit by adding more value than the cost to compete.

-  Each individual is an upside-down pyramid:

-  The base, resources consumed to compete.

-  Our outstretched arms are the value we add.  How far they extend depends on our will and ability to trust, transact, and transport that added value. 

-  Power is the will and ability to act applied to achieving an objective (Clausewitz).  At a fundamental level, self-interest supplies the components of "will and ability".  Individual self-interests, jobs, power the economy.

 

Industries and Communities

-  Self-interest dictates cooperation and collaboration.  My interests are best served by focusing my time and resources through my strongest talents.  I rely on the talents of others to grow food, mine mineral, have babies, manufacture goods, protect us and other needs and wants of our physical and social nature. 

 -  Individuals form alliances, communities, industries, and nations so they can specialize to amplifying individual value added while driving down the cost to compete. 

-  As with individuals, the profit of these structural institutions is the value they create minus the resources consumed to compete for their existence.

-  These institutions are powered by their members; held together by abilities to trust, transact, and transport.

 

Churn

The economy is constantly churning, adapting.  Individuals and institutions scramble to sustain their base, exploit their talents and build relationships that amplify their efforts and resources.   Driven by the will and ability to win we Transact, Transport and Trust, knitting our economy into being:

 

Trust:                Risking that someone else will deliver value more than harm is essential; giving terms in a contract, investing in stock.  Trust expands slowly with good experience, evaporates with bad.  Strong self-confidence, self-reliance and shared objectives expand trust.

Transact:           Specialization requires trading resources with others to cover all needs and wants. 

Transport:         Resources must flow to need.  Just as your body needs a circulation system to stream resources to need and waste to disposal, the life of a complex economy depends on transport.

 

Changing the Life Blood of our Economy

We are experienced with Churn.  Microcomputers and the Internet did not just happen.  First, individuals like Bill Gates and Steve Jobs, defined and pursued opportunity.  With expanding clarity of the opportunity more and more individuals pooled resources and ingenuity combining talents into companies and industries.  Another thread of ingenuity, networks, leverage this value and again, talents combined and opportunities were pursued.  Looking from the outside this commercialization must have looked a school of fish churning to take advantage of each opportunity, individuals moving nearly in unison.  Close up, it was wildly individualistic, yet guided by a systems engineering framework and wise policy.  The system engineering came from voluntary standards.  These guides were not rigid, but displaceable by new innovations.  Policy wisdom came from FCC efforts to serve a greater good.  Communications network rights of way were given priority over local jurisdictions.  Ingenuity attempting to serve the common good gained dominance over fear of change,

 

We can reduce oil consumption by 3-7% per year.  There is at least a 27 cent per passenger mile profit in changing from moving a ton to move a person towards moving just the person in highly repetitive travel.  There are many techniques and technologies that can be used to harvest this profit from the 8 billion miles Americans drive every day.  Ingenuity based ³Green Rush² can follow the successful pattern of computers and information networks.

 

Transportation Policy Should Mirror Communications Policy

Do you believe gas prices will fall?  Will there never be another oil embargo like 1973?  Does our oil addiction encourage and fund terrorists?  Is oil supply infinite and there is no Peak Oil? Is there no consequence for polluting?  Is Global Warming a myth?  Oil supply does not have to stop to start a depression, there just has to be not quite enough oil.  Fear initiates hoarding, hoarding amplifies speculation, national self-interests slow exporting to protect future internal needs, etcŠ.

 

Despite the immediate and severe consequences from many threats, the current transportation policy is brittle.  We spend billions on more roads to make us more addicted to oil, more on buses and trains that account for only 3% of use.  More of what is not working will continue to not work.  The changes the government is directing are variations on the theme of what is not working.  How will bio-fuels solve congestion? 

 

According to the GAO Report 07-283, alternative fuels such as hydrogen, bio-fuels and others will only compensate for 4% of current oil use by 2015.  In 2 to 3 years harsh consequences of Peak Oil will appear.  Yet brittle transportation policy offers no solution.  Does the downward spiral to economic collapse start when gas is $4.75, $5.25, $6.50?  A transportation failure will collapse the entire economy.  If it remains rigid, the best result will be massive unemployment.  The worst will be a shredding of our entire social fabric.

 

Unlike communications policy, current transportation policy blocks ingenuity and adaptation.  Only approved technologies can be tried, only technologies in use are approved.  Unlike the wealth, jobs and profits generated by communications policy, transportation policy is an infinite loop of ever decreasing ingenuity.  Increasing congestion is a good measure of loop.  There are few entrepreneurs and small businesses.  Government subsidized transit authorities and think tanks are locked in that same loop.  RITA¹s (Research and Innovative Technology Administration) entire budget is restricted to current modes of transportation.  With ticket costs exceeding price, subsidized tickets force transit authorities to spend more effort on their next subsidy than on innovating more value at lower costs for the customers.  They are not questioned about profits or service.  There are no incentives for patents, or getting public transit to have the speed and convenience of private autos?  Projects stagnate, dragging on for years, adding to costs but not to value.  It is no wonder that public transportation commands a tiny 3% of transportation market share.  It is nothing like the Internet where everything is tailored to respond faster, better, and be more valuable service at ever-lower cost to the customer.

 

Transportation policy has not always been brittle.  On April 28, 1869 a crew from the Central Pacific built 10 miles of rail between sunrise and sunset.  Risking private capital, the Transcontinental Railroads were built from the same motivation that expanded the Internet.  Individual ingenuity and its commercialization were encouraged. The Wright Brothers, a couple of bicycle mechanics, with only the money they could scrape together, invented flight.  Henry Ford was one of very many scrambling in an unregulated free market to build affordable cars.  There was churn, entrepreneurs invented new modes and personal mobility increased.  Companies, jobs and industries emerged to reinforce ingenuity for a share of the profits.

 

Empowering

We can change the lifeblood of our economy from oil to ingenuity.  It is that way in communications.  It was that way with transportation.  Open rights of way to innovation.  Ingenuity will flourish or fail based on the value created minus the cost to compete.  It will be chaotic but our economy can adapt and shift, churn as the strength of the many leverage innovations of a few, creating new jobs, new companies, new industries.

Draft California Resolution on Solar Powered Transportation

 

Contact

Bill James, bill.james@jpods.com           March 31, 2007