Perspective for the New Year
Chris and I spent last week down in Charleston, SC at a gathering of thought leaders. Participants included politicians, scientists, economists, diplomats, astronauts, financiers, media personalities, entrepreneurs, entertainment executives, and others of specialized expertise. It was a humbling group to mingle with.
The general purpose of the event was to share observations about the opportunities and challenges our society faces, and to spark new thinking as to how to address them.
Chris and I spent several days attending and participating in panel discussions (there were hundreds to choose from) as well as in private conversation with many of the luminaries there. Our detailed observations from Day 1 and Day 2 are available for our enrolled members (enrollment required).
The experience was valuable for us: it sharpened our thinking on a number of fronts. We think it will be useful for you to understand how, so you have a sense of where our minds are as we look forward to the year ahead. What follows are our high-level observations and generalizations. As always, something gets lost when you reduce a rich experience into a few ideas, but with that caveat in place, here's what we came away with:
- Peak Oil remains "off radar"
- Amazingly, among the hundreds of panel discussions, the risk that global oil production is reaching (or has already reached) its maximum was not addressed. Government policymakers are thinking of oil solely in price terms: Rising prices will curtail demand, thus resolving any potential short-term supply issues that may arise. There's no acknowledgment that oil prices are set globally and that, combining demand from other rising economies with falling global production, we're at risk of supply not being able to meet demand at any price the US is willing to pay.
- There is a widespread intent to lessen our dependence on foreign oil from a national security standpoint. Alternatives are looked to with great hope here, though few seem to appreciate the massive time and natural resource requirements needed to scale those solutions (many of which are still more academic than commercial at this state) to any magnitude that will make a material impact.
- Interestingly, when approached individually, many of the politicians and energy specialists agreed (to varying degrees) that Peak Oil is a very real threat. In private discussion, none denied the fact that if it indeed hits soon, we don't have a strategy in place to bridge any gap in the BTUs our nation requires to function. One former administration official underscored his fears that, in the panic to find a solution, the environmental safeguards developed over the past few decades will go right out the window.
- Magical thinking still dominates our economic outlook
- The general vibe from the Wall Street financiers is that the economy is in recovery and will slowly grind is way north from here. Persistent unemployment, massive commercial and consumer debt burdens, housing and other financial malinvestments that need to be cleared by the market, and a growing corporate competitiveness problem are not seen as threats to 2 to 3+% GDP growth over the next several years. Folks are looking at the Fed-driven liquidity as a cure-all - in fact, the Wall Street & DC crowd advocate for at least another trillion in stimulus to keep the momentum building.
- Forget about the impact the arrival of Peak Oil would have on the economy. Not on anyone's radar. As are not the many tens of trillions needed for unfunded entitlements like Social Security and Medicare. Apparently the day of reckoning for those is still far enough away for today's incumbents that it's a problem for their successors to deal with. How about the more imminent bankruptcy of state and municipal governments? The answer: bailouts via the Fed's printing press (I wish I were kidding about this). At what point do we start filling up the hole we've dug for ourselves? (through austerity, pension reform, etc.) No one focused on answering that question.
- It's quite clear that given the optimism, little has changed in terms of behavior. We still have the same players conducting business largely in the same way. The concerning new element is that the Fed's liquidity has created an environment where too much money is chasing too few opportunities. Asset prices in many areas (e.g., commodities) are zooming as a result and money managers admit they are being forced to get more aggressive in seeking above-market returns, a situation we know from experience will not end well.
- Concern is growing about America's slipping global prominence
- The rise of the developing world was noted by all. Economic growth, innovation, infrastructure development, leadership in alternative energy - our national decision-makers are aware of the increasing number of areas in which the US is lagging. There is a lot of talk about what "should" happen to combat this (e.g., Manhattan-type-projects around alternative energy, education reform, infrastructure investment), but actual near-term initiatives to do so are markedly absent. It looked like the older generation there was trying to pass the baton to the younger one in a sort of "Sorry we created this mess, but we're sure you're smart enough to figure out a solution" way. In short, much more hand-wringing than productive guidance.
- Government is seen as the solution to most problems
- It was surprising and disappointing to see how many problems folks think our government needs to play the leading role in addressing. As mentioned earlier, the Fed and its printing press are considered the answer to many of the remaining looming economic issues. Same with alternative energy (most of today's "success stories" would not be so, if not for the large subsidies provided by the government). And with food production. And with education. The list goes on and on. Actually, Chris and I agree there's an important role for government to play, specifically in making strategic infrastructure investments too costly for any single corporation to greenfield, but the list of claims on the public coffers seems much too lengthy. If we don't develop sustainable private solutions in these areas, should we expect the the public ones to be any more successful than Amtrak?
- There is real hope that innovation will resolve many of the challenges we face. But hope in the near-term is probably unrealistically rosy.
- We met a number of really smart minds focusing on many of the issues we're concerned about. There are good people making good progress. We're certain there are breakthroughs happening now or in the near future that will unleash unimagined benefits that will address many of the challenges posed by Peak Oil.
- But implementing solutions in time remains our chief concern. Time, scale, cost and complexity are factors that all need to be accounted for. Since we don't have a clear picture yet of what will close the Peak Oil gap, our confidence remains high that there will be an "in-between" stage of lower energy output. We will continue our info scouting efforts to determine which solutions will ultimately emerge and at what magnitude and timing. One thing we know for sure is that we're still in the early innings of the game...
Regarding this last point, Chris conducted one-on-one interviews with several participants who had useful insight to bring to bear in addressing the issues we face. We'll be posting podcasts of these over the next several days on this site. They're rich discussions and should expose you to new voices and perspectives you may not have encountered before.
The bottom line for us was that the smart money play is to count on the US sleepwalking into the next crisis. Sure, the US is filled with dynamic and innovative people that will respond to the next crisis (energy? financial?) when it (they?) arrive, but anybody counting on US leadership being out in front of the situation is making a low-probability bet. The power of the status quo to insulate itself from unpleasant realities is quite strong.
The good news is that there is much that we can individually and collectively do to mitigate key risks and lead enjoyable lives.
So for 2011, we look at the takeaways above and re-commit to our belief that for most people and companies, defense against the colliding Three E forces will come from their own action. Developing resiliency at the personal and community level is the best investment a concerned individual can make. To that end, we're more focused than ever on developing solutions (more content, services, and community) to help our readers learn about, implement, and share the steps and skills needed to position themselves for the changes of the next 20 years. We'll have a few new ones of these to announce soon - in the mean time, make a New Year's resolution to increase your personal resiliency -- and get started on it!
Happy new year!
Adam & Chris