Rescuing America’s Economic
Lifeblood from Oil to Ingenuity
Cheap Oil is Gone Forever
Assuming that secure access to cheap oil will always be
available, America's economy, our jobs, morphed over the last 50 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 higher.
Increasing demand may overtake supply as populations
grow and the economies of China and India modernize. Or, after
Peak Oil, supplies will decline below demand. Of the 65 largest
oil-producing countries, 54 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.
Regardless of cause, increased demand or supply
shortage, the age of cheap oil is gone forever and our economy is
coasting on the last momentum of that era:
· www.gao.gov search for
“07-283” GAO report on Peak Oil
http://abc.net.au/4corners/special_eds/20060710/ Web cast
We have two or three years to embrace the idea that
cheap oil is gone and to channel the current momentum in our economy
from a base of cheap oil to invent our future.
There is plenty of room to adjust. For example,
about four billion of the eight billion miles Americans drive every day
are highly repetitive. Yet we use energy and create congestion
moving a ton to move a person. Striving to move only the person
saves 27 cents per passenger mile. If we act while there is
momentum in our current economy, ingenuity can preempt waste,
harvesting profits to fund the shift.
An Up-Side-Down Pyramid model of the economy illustrates
how each of us scrambles to find a niche and profit by adding more
value than we consume in the competition. By embracing personal
accountability, with leadership and momentum to guide efforts, we can
adapt our current economic engine to sustainable power sources.
That same model indicates that if we do not adapt before
Peak Oil, or demand for oil exceeding supply, or political instability
or Global Warming consequences, the pyramid will collapse with 30-70%
unemployment being the most optimistic possibility. A complete
shredding of social fabric is possible. The 10 worst famines of
the 20th Century happened when this social structure
collapsed forcing many to compete for few resources; most resulted from
Nature of an Economy
The economy is a confederation of upside-down pyramids.
Life depends on nature; clean air, clean water, sun
light, earth, threads from which we fabricate our living, our social
and economic structures.
- 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 is 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
- 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.
The economy is constantly churning. 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 Trust,
Transact and Transport knitting our economy into being:
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.
trading resources with others to cover all needs and wants.
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 are networks; leverage
this value and again talents are combined and opportunities are
pursued. Looking from the outside it must have looked like fish
in a school, individuals moving nearly in unison; close up, it was
chaos, wildly inventive while guided by a systems engineering framework
and wise policy. The system engineering came from voluntary
standards, guides which were replaced by new innovations. Policy
wisdom came from the FCC; there is a greater good. Communication
networks rights of way had priority over local jurisdictions. Ingenuity
had priority and attempted to serve the common good.
By embracing our individual sense of accountability and
opportunity we can reduce oil consumption by 7% per year.
Example, there is a 27 cent per passenger mile profit in changing
moving a ton to move a person towards moving just the person.
There are many techniques and technologies, jobs that can harvest this
profit from four billion passenger miles a day. The “Green
Rush” can follow the successful ingenuity pattern of computers
In transportation and energy policy, ingenuity,
attempting to serve the common good, requires rights of way so
innovations can find and serve the need. As momentum and
experience grows, systems engineering standards will emerge, succeed
and be displace by the next wave of innovation.
We can change the lifeblood of our economy from oil to
Delay is failure
Innovation is unlikely if we lose momentum and the
economy slides into less trust, fewer transactions and a collapse of
Nearly everyone is aware that airlines struggled and
many declared Chapter 11 Bankruptcy with the increase in fuel costs
after 9/11. There are a lot more farmers hanging on the edge
because of those same unstable fuel prices. Over time we can
adapt to anything. Short-term oil price shocks are highly
correlated with recessions and depressions.
Any major event in the Middle East could cause oil
speculation to jump to $5 a gallon. Farmers already at their
maximum credit limits cannot buy fuel. Fewer fields get
planted. Corn and wheat futures go through the roof.
Escalating food and transportation costs force working families to
choose between rent and food. The housing market already stressed
collapses. Work for construction trades and manufacturing
evaporates. Real estate and bank loans default. Confidence
shatters, transportation collapses as moving a ton to move a person is
no longer affordable.
How many weeks of food is in your house? If trucks
cannot resupply your grocery store how long will your family be
comfortable and confident? Would you keep your job if farmers are
planting 50% of normal? If truckers are hauling 50% of
Current transportation policy blocks commercialization,
the schooling dynamic where the ingenuity of a few can rally the
talents of the many to exploit breakthrough solutions of a few.
The flexible dynamics of the Up-Side-Down Pyramid is frozen,
brittle. Only systems approved can be tried. Only systems
in operation are approved, an infinite loop of ever decreasing
ingenuity. No room for the Wright Brothers, the Henry Fords, the
Bill Gates, Steve Jobs or Ed Andersons. Solar powered JPods that
can be privately funded and operated at a profit are denied right of
way to commercialize. The strength of the many cannot reinforce
the ingenuity of the few without commercialization.
Instead of focusing on adding more value than the cost
to compete, transportation policy focuses on subsidies, less value than
the cost to compete. Where can we get our grant? How much Federal
Funding is there? Policy approves buses and trains that require
subsidies. Policy, faced with severe consequences from Peak Oil,
increasing gas prices, embargoes, wars to protect oil, and Global
Warming, approves highway expansion that will increase our oil
addiction. Reality is about to impact our economy made brittle by
Communications network policy works; ingenuity is the
economic lifeblood of the Internet. Ingenuity can flourish or
fail based on the value created minus the cost to compete. It
will be chaotic but our economy can adapt and shift creating new jobs,
new companies, new industries as ingenuity replaces oil as the
lifeblood of our economy.
Bill James, email@example.com, (612)
414-4211 March 31, 2007