Dana Blankenhorn

Second Big Scam in the War Against Oil

Ethanol was the first big scam in the War Against Oil.

The second is just coming to light, T. Boone Pickens' "big bet" on wind energy in West Texas.

Conservatives are already calling Pickens a hero, but I predict this will end in tears, and will be a major setback for wind development.

Let me count the ways this is stupid:

1. Pickens is going to lose half the power he generates on its way to market. He's using conventional power lines, and that's their efficiency over 200 miles.
2. He's betting $10 billion on 2008 wind technology lasting for 20 years.
3. He's using conventional oil industry economics -- lease the sky instead of underground -- which is about a century too old.
4. He's assuming steady or rising prices for his supply. Won't happen.

The CBS Deal

C|Net has been bought by CBS, for $1.8 billion, a 45% premium over its recent stock price.

I mention this because my income today is wholly dependent on C|Net. I write two blogs for their ZDNet unit, Open Source and Healthcare.

I like the work for two reasons.

One, it's fun, I'm really my own boss.

Second, there's a working business model here. The company knows how to monetize traffic, and I get what I take to be a percentage of what I bring in. That means when I make money C|Net makes money. It gives me a warm feeling.

Hope Rising

Think of this as Volume 11, Number 19 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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In most of the items marked Crisis of 2008 I have emphasized the difficulties in the time we're living with, the problems, the dangers.

But it is also vital, sometimes, to look at the opportunities, and to see the hope rising all around us.

I'm fortunate to find such things often in my work. Sometimes I bring them to you. Here are two just from this week:

• Simple breakthroughs in things like capacitors that can improve the efficiency of electric motors by as much as 300%.
• Breakthroughs in telemedicine which Microsoft is quickly taking advantage of.

Science and engineering are using the benefits of Moore's Law to create progress at a Moore's Law rate. That is breakthroughs are coming faster-and-faster, fast enough (perhaps) to halt the present processes destroying human life on this planet, and even turn them around.

If, that is, they can be brought into the world rapidly enough. The society which brings them to the market most rapidly will have the greatest share in the resulting prosperity.

What we need to make this happen is a process revolution. I am talking about accelerating both economic and political processes. We need to change business' processes so companies make more money solving problems than  causing them, as they have in this decade. And we need to change the way political change occurs at a fundamental level.

A generation ago Republicans talked about making government run more like a business. Now we need businesses to start taking their societal responsibilities seriously.

You do that by changing incentives.

• Right now electric utilities have more incentives to build power plants than to build efficiency into our electrical grid. We can change that.
• Right now drug companies have more incentives to create "me-too" drugs with patent protection than to produce generics we know work. We can change that.
• Right now energy producers have more incentives to withhold product from the market than to produce it. We can change that.
• Right now companies have more incentives to create monopolies than to open new markets. We can change that.
• Right now companies have more incentives to create paper than to see loans are repaid. We can change that.
  

When Al Gore talks about trading carbon credits, this is really what he's talking about, creating an incentive to emit less carbon by simply putting a price on it.

None of these changes are terribly difficult. Most are just a matter of will. And when we put the power of the market to work on the world's problems, pointing to those problems as opportunities with profits going to those who create solutions, positive change can happen quickly.

But that's not all.

An Alternative Energy Census

One of the treats in my first reporting job, at the Houston Business Journal, came in learning about geological maps. Using sonar and great creativity, engineers in the "oilpatch" mapped where potential oilfields might lie. The maps determined the value of potential oilfields, and told wildcatters where they should drill.

With businessmen now taking The War Against Oil seriously, we need new maps.

Such maps might indicate:

• How much sunlight falls.
• How deep you must drill to reach usable geothermal resources.
• How reliable is the wind.
• Where is a stream capable of taking a water wheel?

From such maps we can determine the potential alternative energy value of any place in the country.

Open Source is Parallel Processing on Steroids

I was chatting up a Washington liberal today, and it was depressing.

The subject was computing. The liberal bemoaned the power of corporations to wreck a great, highly-functional government project.

The project was starved for funds, its developers allowed to leave, and now its bones were being picked by lobbyists, all aiming their "best of breed" systems as replacements for bits-and-pieces of what had once been a magnificent computing edifice.

Even if Democrats are elected this fall, he said, they don't understand these technical arguments about open source vs. proprietary. They'll be bought off just like the current crop.

Which is when it hit me, the frame he could use to tear down all those vendors and bring back what was lost, what is in the process of being lost.

Open source is parallel processing.  (Shown is the parallel processing lab at the University of Utah.)

No matter how big a vendor might be, it's still one system. Like the Von Neumann architectures that dominated computing for its first 40 years they have a bottleneck. The only way to speed up the process of finding a solution is to speed the whole process, get more GHz. It's this kind of thinking which led, by the 1980s, to so-called "supercomputers" like the Cray.

Parallel processing was developed in the 1980s at the Sandia Labs in New Mexico. The idea was simple -- to break jobs into parts, to move the parts onto many systems, and then to put the solutions together on the back end.

In the 20 years since parallel processing has come to dominate computing, relegating Von Neumann to a Wikipedia entry. First people stacked Macs to beat a Cray. Then they used parallel processing on the Internet itself, creating distributed computing projects like SETI @  Home. Today parallel processing is used inside chips -- all today's latest AMD and Intel silicon is doing parallel processing. From two to four to eight -- who knows how far we can go with it.

That's sort of how open source works. Only on steroids.

Because with open source not only do you parse out pieces of a project to different companies, or different developers, but their work can cross-pollinate. Not only can you build systems in parallel, but you can also use a vast community of users to find bugs, and another vast army to stamp out the bugs.

The genius of Linus Torvalds lies in his ability to constantly re-engineer Linux' development process, first farming out all the work, then finding new ways to coordinate the massively-parallel architecture which develops in response. And the design of Linux itself responds well to this parallel processing impulse, since it consists of central functions in a kernel, ancillary functions surrounding it, and a host of distribution providers who can build working systems from all the pieces -- sometimes using just parts of the kernel for a mobile system, embracing optional things like virtualization for a server.

Passing the Media Torch

Perhaps the most important story coming out of Pennsylvania may be this.

The media torch has been passed. Not to a new generation, but to a new medium.

Not that the incoming medium notices. To read DailyKos you would think that idiocy were triumphant. Yet despite the constant drumbeat of "Obama's going down" from TV "pundits" and newspaper wags, nothing has really happened. Polls have barely budged.

This would not have been the case 20 years ago, or even 4 years ago. Michael Dukakis was destroyed for simply looking goofy in a tank, Howard Dean by a misrepresented attempt to rev up his supporters. The power of pundits and the media to make (and break) candidates has gone unquestioned for decades now.

What happened?

Something very important.

Community Server

Think of this as Volume 11, Number 16 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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My health is good. We're happy. But there are days when I do wish I were 30 years younger, full of piss-and-vinegar.

Days like today.

Because if I were 28 again, and just starting out, this is the kind of business plan I would dearly love to implement. It's what I dreamed of when I first put "Have Modem, Will Travel" on my business cards over 25 years ago. (The picture is from that time. That's my old Kaypro II on the right. The kitten, LoMeow, lived to the age of 18.)

I call it the Community Server, and it's designed to activate rural communities and the back-end of the Internet revolution, the people who right now are either off-line or turned off by what they see online.

Let's start with some facts. Many types of demand can be aggregated and delivered at low cost. Not just diapers and TVs, as Wal-Mart did. Not just electricity as co-ops have for years. But telecommunications as well.

I've described over the years how cheaply WiFi can be delivered, and how copper wires can be transformed by going all-digital. But now that you've got people an on-ramp, where are they going?

To a directory, first of all. City directories and phone directories. Get the data and put it online.

Build a database of it, with each listing a virtual page. The front-end can be Elgg, it can be Marc Canter's PeopleAggregator, it can be Drupal, or (here's a good idea) it can be WordPress.

Take your time selecting the platform, because it's an important choice. You want to be able to add the capabilities of sites like FaceBook, YouTube, and MySpace, as your users demand them. Few users will demand many of these new features right off -- most will be happy with a blog -- but when they're ready you need to be ready. And your platform choice will determine that readiness. You're looking for an open source platform with an active community and a real business behind it.

Your community server could be hosted in your service area, but it doesn't have to be. If you've already aggregated Internet connectivity it might be fun to host it yourself. Otherwise leave it to the pros, and get near a major Internet Exchange.  In time you'll be the cloud. For now get next to one.

So far I haven't really told you much. Anyone can do this. Many people do and wind up with empty servers. I've done it myself.

What's the secret sauce?

A Nation of Makers

At the heart of the economic component in our current crisis is this salient fact.

We are no longer a nation of makers. (A version of this iconic Norman Rockwell image is painted on the side of my car mechanic's workshop in Atlanta.)

In this last generation we have transformed ourselves from a nation of makers into a nation of takers. Most jobs don't really involve the making of anything. They involve either the recycling of money or the spending of it.

I'm proud to say that my lovely bride isn't part of this. One point of pride in her computer programming job has always been that the transaction processing programs she writes make money each time they run. (Another curiosity -- she's been at one employer for a quarter century.)

My son, on the other hand, wants to be a taker. A lawyer. Usually a prosecutor. Sometimes a trade negotiator. My problem with the law is that it doesn't make anything. It refines rules which take from one and give to the other. The plaintiff gets the defendant's money, or the state takes the defendant's liberty. Essential to security, but it doesn't add to GDP.

While the U.S. is still the world's manufacturing leader (believe it or not) our share of the world's value added through manufacturing has been declining throughout this decade. Changing this last fact is the key to a lasting economic turnaround.

Why the Media is the Last to Know

One of the great ironies is that journalism, which deals in the eternal now, changes far more slowly than other institutions.

It's easy to understand when you think about it. You rise as a journalist mainly by pleasing those above you. These decision makers are older. A journalistic institution has very slow turnover in its management class, so barring bankruptcy you're dealing with people whose formative experiences lie 20-40 years in the past.

Change in journalism, in other words, is generational. The rate of change in an established journalism enterprise has nothing to do with events, nothing to do with reality, certainly nothing to do with how readers' minds may be changing. Then recall how with each new set of political assumptions one medium tends to rise and another fall -- the falling medium digs in its heels as the new medium rises.

Book publishers in the 1890s were slow to credit the journalistic ideas then rising into vogue. Publishers like Mencken were slow to credit film or radio in the 1930s, and Hollywood resented TV in the 1960s.

Yet people in today's rising Internet thesis, like Digby (above) and Glenn Greenwald, people working every day in today's rising medium, continue to get their undies in a bunch over the glacial pace of change in TV newsrooms.

They see conspiracies when they're looking at evolution.

It's Not That They're Clueless

Think of this as Volume 11, Number 11 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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My blog friend Oliver Willis calls those in charge of our financial house clueless.

That's an easy mistake to make.

In fact, it's in the nature of our economic system that you go right up to the line of legality in order to maximize profit. Anyone who doesn't do that is an economic loser, either in the short run or the long run.

You want to go right up to the line, peer down over the edge, and maybe move your toes back a bit. That's what your lawyers are there for, to move your toes back a bit.

This is fine so long as the law is reasonable. If the law is reasonable and cops are on the beat, walking right up to the line of legality and staring down into the canyon is both legitimate and good business. It's what makes markets efficient.

The problem in this case is the law was made unreasonable, and the cops chose to look the other way.

All the problems Bear Stearns caused were through the creation of new, "unregulated" markets. An unregulated market is a market that's looking for scandal. Because there is no reasonable line you can walk right up to, it's easy as heck to become Wile  E. Coyote in such a market -- everything is fine so long as you don't look down.

The defaults on sub-prime mortgages last year were when we started to look down.

A Bigger Crime Than Iraq

With very little fanfare, a bearded bureaucrat about my age recently committed a bigger crime than our entry into the Iraq War.

Ben Bernanke, whose title is Chairman of the Federal Reserve Board, is committing half your country's capital -- $400 billion -- against securities  he knows are bogus, home mortgages that should never have been made, collateral instruments that should never have been created.  He compounded this crime yesterday by explicitly bailing out Bear Stearns, the investment bank which more than any other created this Big Shitpile.

The excuse, given even by liberals like Paul Krugman, was that Bear is "too big to fail."

Bullshit.

The Virtuous Cycle of a War Against Oil

Think of this as Volume 11, Number 10 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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Right now the U.S. economy, and the U.S. in general, is in a vicious cycle. (Picture from DC Fred  .)

Wealth is decreasing, so sales are slowing. Sales are slowing, so the economy is tanking. The economy is tanking, so the dollar is tanking. The dollar is tanking, so we're importing inflation. Prices are rising so we can't cut interest rates. High interest rates causes wealth to decrease...lather, rinse, repeat.

What if we could replace this vicious cycle with a virtuous one, as we had in the 1990s?

We can, but it can't be the same. Back then we were building the Internet. That's built. We could improve it, add lanes, add competition, and that would be a very good thing indeed, but it won't provide the kind of virtuous cycle we got back in the day. Sorry.

But we can get that virtuous cycle if we commit to a War Against Oil.

What does a War Against Oil mean? It means a total commitment, on the order of a real war (not the kind we've been fighting in Iraq) to eliminating the use of hydrocarbons in our lives. That's the clearly defined victory, and (as the current President likes to remind us) nothing less than victory will do.

How do we do it?

Lock in the Gains

With the price of oil now well over $100/barrel, the time has come for the U.S. economy to lock in its gains. (Tom Noddy does magic with bubbles.)

What do I mean by that?

There are a lot of energy saving, and energy producing ideas, which make no sense at $30/barrel but which make great sense at $80/barrel. But we can't make them so long as there is substantial risk that the price will go back to $30/barrel.

We were at a moment similar to this almost three decades ago. People were talking them about wind farms and wood stoves and all sorts of things, with oil at around $50/barrel. Instead of locking in those gains and letting innovation create a market, we decided on a strategy of killing the bastards standing between us and cheap oil. It worked. All those ideas disappeared.

What Starbucks Can Learn from Barack Obama

I have been to several Starbucks in my travels over the last few days. (Picture from MIT's Branding Blog, which is missing the point I'm about to make.)

They've got trouble. Terrible, terrible trouble. Their merchandising is stale. The message from their all hands meeting the other night is they're happy being McCoffee.

What's worse is they think they're in the coffee business. They're not in the coffee business. They're in a host of businesses, most of which they're doing as afterthoughts. Mainly they're supposed to be in the experience business.

Their coffee equipment selection sucks -- my carafe broke today and I couldn't replace it there. Their music selection is horribly limited. Their baked goods are stale. Worse, the employees don't care -- all the chain cares about is making good coffee.

I could jazz that place up in 5 minutes. Watch me:

• Bring in musicians. Empower local stores to find them. Add their CDs to the rack. So what if each gig only brings in a half-dozen souls -- that's all the place can hold. But it starts a process of connecting to music's grassroots.
• Better doughnuts. Or brownies. Or whatever. You need your people checking out the local bakery purveyors, bringing those suggestions up the chain, and you need to empower lower-level managers to try something new. Something fresh. Something from the area.
• A Better WiFi deal. The current AT&T deal lets people with a Starbucks card get free WiFi. Why not print a daily passcode on your receipts so anyone who buys a coffee drink today gets free WiFi today?
• Better merchandise. I wanna carafe. I want better selection, which means you need better buyers who will scour the globe (as they used to claim they did) for coffee-related stuff. Start it small, buy more if it does well. Spruce things up.

Oh, the Obama headline? There's a ton Starbucks can learn from Barack Obama. But you'll have to click through to learn what it is.

The Unstoppable Power of Communication

The most powerful force in the world is communication.

This medium brings more of it within reach of more people than any medium has before. (Pictured, the capital of Rwanda.)

When George W. Bush was in Africa this week reporters were astounded by the number of people there who supported Barack Obama, who seemed to know all about him.

And why not? Africa is filled with Internet cafes. Africans don't have to listen hopefully for a word from the BBC anymore. They can pick up The New York Times.

Recently I mentioned the idea that Obama should go to Kenya and try to sort out the growing crisis there. Turns out he's been there, via radio. He made a statement and took questions at the end of last month. This has not yet had an impact, as the struggle has morphed into a tribe-on-tribe war over land. But he was there, and could be again, at any time.

It's not just politics where this medium is making enormous change. It's in every facet of life. The turnaround in Rwanda is being driven as much by information as anything else. The use of sympathy to reach markets, and the opening of an online stock exchange,  is enabling capital to reach all of East Africa. Trouble in Kenya can now quickly move capital to Rwanda and vice versa. Rapid capital flows can create a gigantic incentive to make peace.

Al Gore as a King in New York

One of the most important, least understood stories of this year has been Al Gore's reluctance to endorse anyone. (Picture from The Atlantic, originally taken by the World Resources Institute under a Creative Commons license.)

There are all sorts of theories, but only one theory makes sense.

He has better things to do.

As I wrote in November, Al Gore is focused on market solutions to the War Against Oil. He has learned, through his work on An Inconvenient Truth and all the opportunities which flowed from it that the power of money can actually be greater than the power of government. He has also learned that money follows credibility.

During 2007 Al Gore signed some very, very interesting deals. He signed deals with venture capitalists, and hedge funds. The core of those deals was that Gore, and people working with him, would go through all sorts of alternative energy proposals, not just those in the market, but those seeking market funding and those still in the labs. He would offer his considered opinion on the validity of each idea, helping to make sure that capital flowed efficiently toward ideas which made the most sense. And he would profit from that.

The Right War Against the Right Enemy

Think of this as Volume 11, Number 7 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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The most frustrating aspect of this whole decade is how we've gone to war against the wrong enemy, using the wrong means. (Cartoon from the Toronto Globe & Mail.)

Advocates of our present course go on-and-on about radical Islam, about evil-doers, about how we must confront them militarily, over there, so we won't have to do so over here.

There is so much wrong with that sentence it's hard to see where to begin. But let's try.

First, the enemy. It's not Islam, radical or otherwise. Islam is a means to an end. If we did not need oil we would care a lot less about the Middle East, and it's very likely Islam could start caring less about us.

It's a lot more like the South in the Civil War. Why are you fighting us, the Union man asked. Because you're over here, the Confederate replied. Slavery was the economic model behind the talk of state's rights. In the same way, oil is the economic model behind all this talk of Jihad, and a clash of  civilizations.

Oil should be our enemy. Reduce our need for oil and everything else gets easy.

Second, the means. We have been using military means exclusively. And our military rides on a sea of oil.

Whether we're "winning" or not, we're losing because of the means we're employing.

Esther Dyson is Selling Something

A long time ago, in a galaxy far, far away, Esther Dyson was a journalist.

Now she's a venture capitalist, but most people still think she should be accorded a journalist's credibility.

That is wrong.

When she speaks now, she is usually selling something. She's a saleswoman. Not that there's anything wrong with that, but when a salesman talks to you a light flashes on-and-off for you, shouting "salesman"! Journalists are expected to tell you the truth, without fear or favor.

And right now she's selling the idea of behavior being more important than content in building value for Web ads

Salesmen should not be writing what purport to be journalism columns, but I haven't confused The Wall Street Journal with journalism for some time, so there you are.

Fact is we went through this dance about behavioral or contextual Web advertising models a decade ago. Among those trying to build contextual models was Engage, a unit of CMGI which was one of the most notorious flame-outs of the dot-bomb era.

Have You Heard The Good News About Pakistan?

Pakistan has recently taken on the role Americans once reserved for Iraq, Afghanistan, Serbia, Iran, and (before that) the Soviet Union.

It's the unknowable, foreign, other, dangerous in the extreme. It frightens the children. It's meant to.

We're told, for instance, that Pakistan harbors Al Qaeda, its government is unstable and autocratic. It's the world's most dangerous place.

Maybe. But when you see Pakistan through Pakistani eyes, as it is my privilege to do, it's not so black-and-white.

My friend Tariq Mustafa IM'ed me from Karachi this morning with some of the good news:

• Every corporation in the Karachi area filed their tax returns electronically for 2007. I'll bet you money that's not true in Georgia. Many companies here haven't even started in on their returns.
• A job board launched by two Pakistani emigrants to Stanford now powers some of the biggest blogs in the valley. Silicon Valley, that is.
• oDesk is illustrating their outsourcing capabilities by showing off opportunities in Pakistan.

How to Really Succeed in Business

Think of this as Volume 11, Number 5 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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As a door prize for covering a software conference this week, Rick Chapman of SoftLetter gave me a copy of his book.

In Search of Stupidity was, for me, a ton of fun. It tells the history of the PC business, that part of the business I lived through and covered. Sort of a memoir of my time. And it's well-written -- funny, breezy, and conversational. While most business books are dry tomes filled with charts and buzzwords, Rick's book is a bedtime chuckle filled with stories and anecdotes.

His theme is that you can succeed in business if you just avoid being stupid. Most companies fail due to easily foreseen, really stupid mistakes, he writes, and he cites endless examples, many of which I personally covered or lived through.

In a way it's much like this newsletter.  Since launching A-Clue.Com in 1997 I focused on finding those who had a Clue, who seemed to know what was coming, and those whom I deemed Clueless.  Smart and stupid, clued-in and clueless. It's pretty similar.

But there's more to it than that.

Hawaii's Small Ambitions

The state of Hawaii has an ambition, to get 70% of its energy from renewable sources by 2030.

Pfaw! (This, and other moving images of Hawaii from back in the day, are to be found at JaneResture.com.)

When it comes to renewable energy potential, Hawaii is Kuwait. As our most-southerly state Hawaii has the most intense sunshine in America. Its volcanos and trade winds mean the west side of islands like Hawaii itself are literally desert, perfect for solar energy collection.

Then there are the volcanoes themselves. Geothermal energy so close to the ground you can taste it. And those trade winds, both reliable and often fierce. And those ocean currents.

Hawaii is a laboratory we can use to create energy exports, not just sustain a tourist economy.