Dana Blankenhorn

Fall of the House of Oil

There is no energy shortage. The sun shines. The wind blows. The tides roll. We live on a molten rock.

At the start of this decade, when I first began covering the War Against Oil, and changed the sub-head of this blog to reflect that, I believed the key to victory was bringing enough investment to the space, public and private, so that the cost of renewable energy would fall below that of fossil fuels.

It’s happened.

Crossover happened just as I expected, in 2016. The cost of energy from solar panels is now lower than that from burning coal. The cost of energy from windmills is now falling below that of burning natural gas.

The only thing keeping fossil fuels alive in the big utility model is the sunk cost of infrastructure. When that proves unreliable, as it did in Puerto Rico a few years ago, it’s replaced by solar power, batteries, and micro-grid technology, just as Al Gore predicted two decades ago. 

FUD the Free Web

It shocks me how many tech writers and self-proclaimed liberals have joined the recent attack on the Free Web.

That’s what Facebook is. That’s what Google is.

They’re the free web.

They don’t charge you for using them. They’re free. Access isn’t free, and neither is most of the information the Web provides. Most of the news today is hidden behind paywalls, available to subscribers only.

But Google and Facebook are free.

The attackers say that on these services “you are the product.” They like to say that because they can afford the cost of subscribing to all the things which interest them.

Google and Facebook have built over $1.3 trillion in market cap, and almost $200 billion per year in annual revenue, with an advertising business model. They won the market and invested their money in building what we today call the cloud. Unlike the phone companies and everyone else, they invested ahead of their growth. Facebook put $1 billion/quarter into its server farms before it had the revenue to back it up. These are risk-takers. They’re what capitalism is all about. They’re Amurica.

This Medium Cries Freedom

Throughout the decade now ending there has been a steadily growing drumbeat of elite opinion to the effect that this medium enables tyranny.

I blame Trump. The Russian manipulation of Facebook made Trump possible. Now tech must live down that legacy.

It means every collection of private data, whether by corporations, government or hackers, whatever the motive, is seen as evidence we need to throw our computers out the window. Every new technology meant to thwart abuse, meanwhile, is seen as a threat to human liberty.

Tech can’t win.

Technology can, in the hands of a ruthless dictator, enable terrible abuses. But there’s a limit.

The Political Triumph of Tech

Some 40 years ago, when I was commuting up the West Loop of I-610 for the Houston Business Journal, oil seemed to be in big political trouble.

We know how that turned out.

Today, in 2019, it seems that “Big Tech” is as friendless as “Big Oil” was then. But history sort of rhymes. These only seem to be different days, and you don’t have to be able to rhyme benzodiazepine to figure it out.

Reporters without brains call the reaction against tech their big story. But it’s the reaction to the reaction we need to be looking at.

Decoration Day

The holiday known as Memorial Day was originally called Decoration Day.

It was established in 1868 to memorialize the Union victory over the South and the Slave Power.

The pro-slavery attitudes of the South never died, however. It became the “Noble Cause.” It remains ignoble today.

Jim Crow is one testament to it. So is opposition to the Civil Rights cause, the “duality of the southern thing.” Whites prohibiting “miscegenation” made every mixed-race baby a crime until 1967, six years after our 44^th President was born. I’ll explain why this is funny in a moment.

Human Capital and the 1980 Game

In 2020, we will be 12 years removed from the first political triumph of technology, the generational election of Barack Obama. All his progress is now being undone, much as a generation ago oil’s gains were threatened by Jimmy Carter and his cardigan sweater.

As we prepare to play the 1980 Game the question becomes, who is Ronald Reagan now? (It’s usually phrased, “Who Can Beat Trump?”) The answer lies in what drives our economy today, and in what drove it then.

I remain confident in the ultimate triumph of Democracy because, today, human capital is the gating factor to economic growth.

Aladdin’s Bank

Jeff Bezos doesn’t really have over $100 billion, not in the way you may have $1,000 in a bank. Amazon.com isn’t worth $900 billion, in the way your house is worth $250,000.

Both valuations are based on a lie, the idea that Bezos could sell out his stock, or that ready buyers would take out all shareholders at the current valuation. The value of a stock-based fortune, or a company’s market cap, is based on the price paid at the last trade.

So it is that we return to Aladdin’s Cave, which I wrote about in 2013.

Had Aladdin come out of that mythical cave, with all its gold and jewels, and tried to sell them, the value of gold and jewels in that town would have plummeted. He would have brought only a fraction of the value.

On the other hand, what if Aladdin were a Hamiltonian?

Capitalistic Feudalism

The central problem of our time is the march toward feudalism.

It began among capitalists.

Democracy is essential because it lets people change their minds and, upon changing them, reform the institutions that control their lives. That’s what the Declaration of Independence is about. It argues that despotic systems must be overthrown when they threaten our “life, liberty” or pursuit of happiness.

Many people, including me, have argued that the current attack on democracy began with The Jim Crow Project.

But long before one of our major political parties abandoned democracy, business did. It happened as these things usually do, with the very best of intentions.

As I noted last week, the system that came into effect in 1789 had only property owners voting.  The true genius of succeeding generations has been to expand the right to vote, thus the pool of those who can effect change, to more and more people. This work continues, and it’s important.

But there’s another kind of democracy, corporate democracy. It may be even more important than electoral democracy because even functional democracies operate by the Golden Rule – he who has the gold makes the rules.

Before we can hope to have electoral democracy, then, we must have corporate democracy.

We Are All Founders

There are two distinguishing features to the existential crises in American history.

The first is it makes us return to first principles, causing us to re-examine, criticize, and eventually deify the past.

In the run-up to World War II, a crisis that really began four score and seven years ago, in 1932, there was a vogue for Abraham Lincoln. Henry Fonda and Raymond Massey did popular biopics, and his memorial became a sort of Ground Zero for what was best in our political natures.

In our time, Lin Manuel Miranda did this to Alexander Hamilton while Ron Chernow, who did the biography of Hamilton on which the movie was based, proceeded to resurrect U.S. Grant. The purpose of both these pieces of art was political. Miranda wanted to highlight the importance of immigrants in getting the job done. Chernow wanted to push back against a Confederate-inspired view of history that still, 150 years later, has those who supported human rights being disparaged while those they fought are exalted.

We love to call America the world’s oldest democracy. We revere the founders as giants.  We even call them the Founders.

But the original Constitution was profoundly anti-democratic. Women couldn’t vote. Neither could blacks, nor native Americans. The franchise was reserved for white males, and not even all of them. You had to be a property owner.

The Google Primary

One reason I’ve always been confident that Trump was doomed was because history has generational cycles, and the rising generation hates him.

Another reason is that American politics are based on economic cycles, and the economic future hates him.

America runs by the Golden Rule. He who has the gold makes the rules. The business of America is business, and the business with the highest value-add calls the tune.

Back in 1979 this was the oil industry. Jimmy Carter defied oil with a cardigan sweater and a call for conservation. They buried him.