Here is what 45 years of studying business cycles has taught me.
Now is the time to work on your next great startup.
Right now. When the whole world is collapsing around us. When old business models are failing. When everyone is worried about their job, or about to lose it.
Look at the opportunities. I detailed them three years ago. The end of oil. The machine Internet. DNA as a programming language.
These boil down to renewable energy, control systems, and medicine.
Here’s today’s reason for optimism.
Fossil fuel companies are not the “energy industry.” They never were.
They’re miners, seeking fuel. They’re bringing up stuff from the ground that engines then burn.
Solar panel and windmill makers aren’t the “energy industry” either. They’re manufacturers. They make engines that create energy.
Utilities are the energy industry.
The difference between oil companies and the manufacturers of solar panels is the difference between fuel and an engine.
Until recently, man had no choice but to do the energy two-step, burning fuel in engines to create energy. The engines created by renewable energy producers weren’t economically practical.
Now they are. It now costs less to build and run a windmill than a car engine, much less. The gap gets wider all the time. Even when the cost of battery storage is added, harvesting the energy all around us is the cheaper way to do things.
Given both that economic reality and the damage fossil fuels are doing to our climate, it’s clear that oil is the crack cocaine of our time. We need to get off it if we’re to survive as a species. As I wrote three years ago, we’re in the process of doing that.
Nearly three years ago, after attending the Heidelberg Laureate Forum honoring great mathematicians and computer experts, I wrote a three part series on the big technologies of this decade:
This is a good time to revisit the trends. A recession is also the best time to start a new tech company. Incumbents are faltering and you get a clean sheet of paper to write the future on.
Continue reading "The Three Big Challenges Boiled Into One" »
Oil prices have been falling in recent weeks, and analysts have been telling investors to “buy the dip.”
They’re wrong.
The current “energy crisis” is a short-term phenomenon, caused by Russia’s invasion and falling production. Few people seem to comprehend that the falling production has a cause. The cause is a clear understanding that renewable energy prices are coming down.
The new buzzword is “grid parity.” The definition is that solar and wind energy equal the cost of fossil fuel energy, without subsidy. That doesn’t just require panels and turbines. It also requires storage, so power levels can be boosted and lowered at will.
We’re approaching one of the biggest snap back rallies Wall Street has ever seen.
Once Putin’s War is over, everything’s going up. How much depends on the result.
Right now, signs are good. Israel has joined the sanctions regime. China is only going to sell stuff to Putin for cash. But China is in worse trouble than we are. They’re still fighting COVID with lockdowns. Their stock market is a mess. Their property magnates are collapsing. Hong Kong has created a brain drain. Shared prosperity is becoming shared misery. I expect a slow policy readjustment.
Once the war is over inflation will decline. Not magically. Prices are always sticky downward. You don’t cut your price based on costs. You do it when your rival cuts theirs.
Technology remains our best weapon against inflation. My long-term concern remains deflation, and how the gains of technology are apportioned. Fortunately, all those forces who sided with Russia, including our worst oligarchs, are being discredited by events. No one in Washington can see this because they only see today.
Analysts, and investors, are always fighting the last war.
The last war was the asset bubbles of the 1990s and 2000s. The first was in tech. The second was in housing.
Both fell after the bubble hit. Both times the government responded by juicing demand, first with the “forever wars,” then with a domestic stimulus and helicopter money.
Both times, this worked because the problem wasn’t related to what happened during the 1970s. Back then, resource inflation was to be feared. There was no substitute for oil. Now it’s just speculation and its aftermath.
The same kind of blow-off is happening now. There’s a fear that money will cost money, so speculators are pulling back, selling everything else to raise cash. (Cash is doing fine.) So far, it’s not nearly as bad as what came before. But fear is gripping the market because, this time, it’s accompanied by inflation.
When I first covered renewable energy a decade ago, solar shingles were the Holy Grail. It was what everyone said they wanted to make. A solar shingle would be as efficient at creating electricity as a solar panel but would go on just like a regular roof, with a nail gun.
A lot of people tried and failed to create the product. Home Depot tried selling homeowner-installed solar panels. Elon Musk built a billion dollar “Gigafactory” in Buffalo, New York, supposedly to make solar shingles.
But at the truncated Consumer Electronics Show (CES) in Las Vegas this year, a game-changing solar shingle finally debuted. Its story is almost as interesting as the technology.
The shingle is called Timberline. Sandia Labs helped develop it. The manufacturer is GAF Energy.
The shingles are slightly bigger and much heavier than conventional roof shingles, but they go on the same way, with a nail gun. GAF says it has invested $1 billion into the product, which converts 22.3% of solar energy hitting it into electricity.
GAF itself may be more interesting than its shingle. It was once the U.S. arm of I.G. Farben, the Nazi chemical company seized after World War II. Under Jesse Werner, it became a big roofing company in the 1980s. This included an outfit called Rubberoid, which owned an asbestos mine in Vermont. (Oops.) Under the name G.I. Holdings, it went bankrupt in 2001 but was still paying out to victims in 2011.
It really is the best of times, and the worst of times. At the exact same time.
In one reality, stocks trade at record levels, homes are worth their weight in gold, and fortunes head for the stratosphere.
In the other reality inflation is rampant, people can’t afford to retire, and millions are losing confidence in the future.
The fact that all these things are true is a political choice, one Washington pundits insist will be reinforced in 2022 and beyond. The pundit class is driving Democrats crazy, and the seeming passivity of the Biden Administration has them hopping mad.
But a lot of things are going to happen next year, and most of them aren’t bad.
For starters, we have it relatively easy. Chinese consumers who pre-paid for homes now find they’re not being built. Turkish consumers are finding their money is becoming worthless. Britain is going broke thanks to Brexit. Inflation and COVID are much worse in South America and Africa than they are here.
Most countries across the world are sleepwalking toward crisis while the bill for climate inaction is coming due.
There’s only one force that can take decisive action against the crisis, the Creativity Economy.
Bankers, reporters, and politicians are all focused on inflation right now.
Markets know better.
It’s true prices are rising. Wages are rising, too. Working conditions are even improving. I fail to see a problem here.
But just as some prices rise, other prices fall. Lumber prices have already rolled over. As electric cars begin to roll off lots next year, gas prices should ease.
A generation ago, it was hard to counteract rising commodity prices. Macro analysts are still locked into that mindset.
But now there’s software. Software scales. Software fights inflation with productivity. Clouds also fight inflation, helping scientists and engineers create substitutes for resources.
Recent Comments