Major Downturns Have an Upside – The Emergence and Growth of New Business Ideas

Economic recessions create bursts of economic and cultural change. Did the buggy and coach business just fade away?  Or did those companies die most quickly in the Panic of 1907-1908 and the Post-WWI Recession, only to be replaced by rapidly expanding businesses involved with motor vehicles, and a rising economic tide to lift them?  What new inventions attained increasingly levels of acceptance and use as people struggled for every advantage to dig themselves out of the recessionary problems of the Great Depression?  Were businesses developing lighter construction materials, alternative energy systems, and fuel conservation technologies some of the positive outcomes of the Oil Crisis and recession of 1973-1975?

Better Regulation of Business Will Be Necessary as Population Explodes and Energy Prices Rise

Big corporations are like big sharks.  They’re not evil.  They’re just eating. I read this clever observation several years ago on CDBaby, and had the immediate realization that WE have to swim with those sharks, and our shark cage (government) just isn’t protecting us like it once did.  On this, the eve of release of Michael Moore’s new movie “Capitalism: A Love Story“, I just have to write about the impact of capitalism on our future, and how we might possibly avoid sliding into an almost feudal state where a tiny upper class of owners dominates a huge but painfully poor mass of wage slaves. 

The Future of Energy: Things Never Change So Much …

Things never change so much as they stay the same. That’s the saying, anyway, and I figure I’ll see how things balance out if I stick around long enough.  I expect that there will be surprises, and some advances people expect won’t happen, or will be disappointing, while other inventions will become mainstays of our civilization.  Inevitably, the deciding factor behind the decision to discard or keep something involves money, and I believe that will extend to our energy infrastructure.

Whose Lives Will Change Most as Fossil Fuel Prices Rise?

Fossil fuel prices will rise. There’s no doubting that, in the absence of any other supply of cheap, high volume energy, fossil fuel supplies will decline, and prices will rise as population continues to explode.  It is interesting to examine who is most likely to feel the effects of the change, as I don’t think many people, at least in North America where I live, are thinking about it.  In the end, it appears that the middle classes in the most developed countries and in the temperate climates will feel the effects the most.

The “Glide Path” to Sustainability will Raise Recycling to a Large Scale Art

As population declines in the latter half of the 21st century new construction will be cut to a minimum, and renovation and recycling of existing buildings will dominate the construction industry.  Few new buildings will be needed as populstion decreases, growth will no longer be the predominant economic theme, and decreasing tax bases will reduce public funding. People may move out of some neighborhoods and towns and collect in others, probably to live closer to places of employment, education, etc., and reduce their cost of living.  Will smart individuals start working today to build profitable businesses that take advantage of the changes in our future?

Will Complicated Economic Cycles Recur and Worsen as Population Explodes?

There are lessons in the current worldwide economic decline as to how the global situation will interact with the population explosion in the coming decades. This recession appears to have been set up and triggered by a range of economic and political factors. A short but fierce spike in oil prices on top of a real estate price bubble combined with an regulatory trend going back decades that not only allowed banks to take on far too much risk, but also promoted a business culture in which debt became the lifeblood of businesses around the world.  Why did businesses take on so much risk?  The short term-focused profit motive, instead of good long term planning, seems to be a root cause.

The Shark Cage is Rusty – How Capitalism and Government Might Change for the Better

Corporations, by their nature, are focused on profits. Unfortunately, this causes them to sub-optimize the overall results for society. This is one of the shortcomings of the current capitalist system. Corporations, in their soulless drive for profits, will take your last dollar if they can, and will influence governments and drive them away from their original purpose, to ensure the common good and the positive evolution of society in ways that reflect the principle that, as they say in business school, “a rising tide lifts all boats.”  I found an interesting and pointed expression of this last year.

“The Bomb” is Here, But It’s the Population Bomb

My childhood fears of nuclear war have come to pass, but not the way I expected. When I was a kid I had a great fear of nuclear war.  At school we drilled, hiding under our desks, in case Russian missiles with nuclear warheads should wreak terrible, radioactive firestorms on us.  One winter night around the age of 6 I woke up from a dream and looked out the window to see the sky glowing yellow – I was immediately convinced that either a nuclear attack was creating the incredible light in the sky, or that the nearby Fermi nuclear power plant had blown up, and in either case the radiation would soon get us.  As it turned out, it was just a full moon illuminating a light snowfall, but I will never forget the terror of those moments.  These days, with nuclear war seeming to be a much more remote possibility, I don’t even think about it.  The other night, however, I noticed the sky glowing orange most of the way around the horizon, and realized that, if I didn’t know it was street lights illuminating the falling snow, I would have thought a nuclear war had broken out.  The lights were like those of an explosion frozen in time.  Then I realized that this IS an explosion – a population explosion.  This extremely long, slow-motion explosion started over a century ago and the echoes won’t die out for decades, or maybe centuries, to come.  Unfortunately this explosion has consequences potentially more devastating than even a global nuclear war.  So what are we doing about it?  How can we mitigate the effects of this very-slow, long term explosion on ourselves and our descendants?

What Will Happen to Businesses When Energy Cost Eclipses Labor Cost?

Today the cost of labor is the biggest single cost element for many businesses, and drives most decisions. The rise of fossil fuel prices will not be smooth,  however, as we have seen in 2008, when oil prices doubled in a matter of months and then fell back to 30% of their peak in a few months more.  During these spikes, and in the longer term as fossil fuel sources become more difficult and costly to extract, energy costs will rise to a level that challenges or surpasses labor as the biggest component of cost for many or most businesses.  The law of supply and demand also kicks in as population continues to expand, and labor costs in many industries will fall as increasing numbers of people are seeking those jobs.  At the same time, rising energy costs will reduce or eliminate the advantage of manufacturing in “low cost countries” such as China.  How will businesses react?  Will the net effect be to cause people to generally live at a lower economic level and make less money for equivalent work compared with today?  Will manufacturing of progressively lower cost and higher margin goods return to the developed countries?

Trading in Abstractions – Is This Why We (and Wall Street) are in Trouble?

We are surrounded by financial abstractions we can rarely see, and even less often understand. Trading of securities created by bundling debts, for example, is an abstraction.  While there may be some assets behind those debts (they may be secured debts such as mortgages), the value of a debt is partly comprised of an expectation that the debt will be repaid.  This expectation is an abstraction, as you can’t easily measure it or place a value on it.  This is just the tip of the iceberg, however.  On top of that there are also commodity futures and other financial abstractions where the value is at least partly based on promises, expectations, and hopes.  People buy and sell financial instruments based on abstract notions such as debt every day.  The problem with trading in abstractions is that since there are few real assets attached to them, and thus little real value supporting them, emotions have an inordinately greater impact on how we value them.  Is this a key factor behind the incredible volatility and risk in our markets?  Is the fact that we have extended our financial world into heavy dependency on debt and other abstractions creating major risks for us all?  Does trading in abstractions put as at risk of panic and unrealistic expectations, positive or negative?  Given the enormous scale and presence of debt in our lives today, have we built a house of paper that can dance wildly in the winds of our emotions, hopes, and expectations, and which can therefore make and destroy fortunes within days or hours based purely on the news or propaganda? Given that such matters have become only more complicated over time, and are already beyond the ability of almost everyone to fully understand them, will they continue to become even more complicated in the future?

Infrastructure Will Change Significantly as Population Inevitably Declines Towards a Sustainable Level

Studies of past population reveal some valuable facts with implications for our future. Given that, before the widespread use of fossil fuels, there were apparently never more than about a billion humans on the planet, the fact that we are over six billion now and climbing fast, and that fossil fuels prices are already rising due to increased scarcity, it is probable that human population will decline back toward the one billion level in the next century. This suggests a variety of scenarios for making the adjustment. Most scenarios sound bad, but the challenge to us is to create and implement long term plans to manage the change. Given what we can anticipate, can we sufficiently raise the importance of taking the long term view and making long range plans to minimize the pain of the adjustments we face in the future? The economy and infrastructure will have to change significantly, but how? How will the business world change in response?

Does Keeping Fuel Prices Low Hurt Us in the Long Run?

Does fighting price increases caused by supply-demand forces stop the free market from working and worsen our future problems? In other words, does prosecuting price gougers during gas shortages hurt us in the long run? I’m going to take a potentially-unpopular position here for the sake of argument and as a thought starter. Price gouging sounds like a real crime – sellers taking advantage of buyers who have serious needs and no recourse – but isn’t that just the free market at work? By making laws against sudden, demand-induced price increases aren’t we artificially controlling the price and removing people’s incentives to change their behavior for the better? During gas shortages people panic and hoard supplies, but wouldn’t high prices make people think of more effective ways to deal with the crisis before it happens the next time?  The good news is that  many people seem to be getting the message: fossil fuels won’t last forever, and we need alternatives now, or as soon as possible.

Will Rising Energy Costs De-Globalize Us into Regional Economies?

Short term fluctuations in energy prices notwithstanding, the long term trend of rising energy costs will affect commerce and change where our goods are manufactured. Last May I heard a radio interview in which an importer in New York City said the cost of moving a container of goods from China to NYC had increased in less than a year from $4000 to $5600, and it occurred to me that this is a greater increase than the gross margin on many of the less expensive goods currently being shipped.  Will manufacturing return to the affluent areas like North America and Europe in a reversal of the globalization trend we’ve seen in the last few decades, due to increasing energy prices?

Growth Can’t Continue Forever, So What’s Next?

Perhaps our many wonderful scientific advancements and ever-more sophisticated civilization have blinded us to certain realities. We have enjoyed the benefits of cheap energy for the past few hundred years, first with coal and then with the addition of petroleum, and our population, scientific knowledge, and standards of living have expanded greatly. Eventually, however, the easiest to obtain of our fuel sources will begin to run out, and the cost of production will inevitably rise to the point where we won’t be able to afford to use it as we did before. We have become so accustomed to our situation that we take growth for granted, and it seems the entire business world takes it as a given that success and profitability are possible only through growth. Since growth can’t continue forever, what will replace it? Are we smart enough to avoid a precipitous decline and the pain that suggests, and find a new paradigm that permits more controllable change and is sustainable in the long term?

Global Warming and Our Responsibility to the Future – A Call to Action

Global warming and climate change are only pieces of the puzzle. The storm of media coverage and conflicting scientific data around global warming is overwhelming, but it is concealing very real problems we need to face if we are to ensure ourselves and our descendants can continue anything like the kind of lifestyles we have today. Climate change will happen, whether we cause it or not, and when it does, how prepared will we be? Energy supplies are a key factor, not only for our current relative comfort but as an enabler to our ability to deal with issues we will face in the short and long term. Where does this all lead, and what are our responsibilities as individuals? What can we do to ensure a better future?