Dana Blankenhorn

The 1979 Game

An industry’s takeover of politics tends to be defensive.

It happens when that industry seems to be riding high. It acts against leaders whom neutral observers may credit with that rise.

I covered this story 40 years ago. In Houston.

The oil industry did great in 1979, despite Jimmy Carter’s cardigan sweater. Saudi Arabia, more Texas’ ally than America’s, had proven the economic power of resources with its 1973 embargo. Iranian mullahs believed they could use the same economic force against America. Oil understood this as a threat to its interests. Carter saw oil’s profits as leverage he could use against the Iranians.

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. 

The Sun Shines, The Wind Blows, and Watch Houston Become Detroit

Nearly a decade ago, having been tossed to the curb by ZDNet for calling out a “privacy” lobbyist as an industry shill, I changed the headline of this blog to focus on renewable energy.

“There is no energy shortage. The sun shines, the wind blows, the tides roll, we live on a molten rock.”

Tidal and geothermal energy have yet to make major contributions to our energy mix, but the Sun does indeed shine and the wind does indeed blow. More important is the cheapest form of renewable energy, efficiency, and which is always before us.

Today, U.S. energy demand is just passing its year 2000 peak. This is true despite Gross Domestic Product, the economy’s production of goods and services, rising from $13.131 trillion in 2000 to last year’s $18.566 trillion.  That’s 41% more economic activity with no increase in energy use.

The Crash of 2019

Right now, in early April of 2019, the U.S. economy seems to be in great shape.

Inflation is minimal. Money is cheap. Unemployment is down. Wages are rising.

Here is why I think this is all going to collapse, and that right soon.

Deflation.

As I have said here many times, technology creates deflation. Deflation is the primary subject of my Moore’s Law book, which I’m getting ready to rewrite for 2020.

To understand deflation in action, look in your hand.

What Comes Next

After the market falls, when everyone is in despair, is when I get the most excited about the future.

That’s because recessions aren’t so much an ending as a beginning.

A recession means the old games no longer work. The oldest business processes disappear entirely. WE have seen this during every recession of my working lifetime.

Small towns fell under the onslaught of Walmart in the 1980s. Big boxes replaced department stores in the 1990s. In the 2000s, whole layers of middle management disappeared. In this decade, gatekeepers like insurance agents have gotten the boot.

The 1979 Game

When you win the popular vote by 9.5% but still lose ground, as Democrats did November 6, your problems are systemic.

The result underlies tech’s obligation to come out of its shell and fight for the political system that birthed it.

Tech moguls have done some things. Jeff Bezos bought The Washington Post, Marc Benioff bought Time Magazine, Laurene Powell Jobs bought The Atlantic. The key to gaining more power will be in creating journalism business models beholden to tech interests.

Tech must do to Bizarro Carter what oil did to Jimmy Carter, and for the same reason -- to protect its self-interest.

Peak Carter, Peak Trump

One thing that has surprised me over the last two years is how almost no one understood my point right after the 2016 election, that Donald Trump is a sort of Bizarro Carter. 

By that I meant he is completely the opposite of Jimmy Carter. Carter was a Democrat. Trump is an Autocrat. Carter believed in human rights. Trump believes in the divine right of kings. Carter championed the environment. Trump trashes it. Carter said he’d never lie to us. Trump lies 6 times before breakfast.

What they have in common is they represent the end times for the Political Thesis that birthed them. Carter was elected 44 years after Franklin Roosevelt and was the last President to run on those principles. Trump came 48 years after Nixon and will be the last President elected under the Nixon Thesis of Conflict. 

Another View of the Carter Administration

It has been clear to me for years that the 2010s are, in many ways, a bizarre recapitulation of the 1970s.

I just didn’t know how much.

While the 1970s represented the rise of oil, the 2010s represent its twilight.

The 70s were marked by two key crises, in 1973 and 1979, during which supplies were cut and prices skyrocketed.

The 2010s have already seen one price collapse, in 2014. It is going to see another before the decade is out.

It is against this backdrop that I would like to revisit the administration of Jimmy Carter. This time, especially if you’re a liberal, try to imagine yourself in opposition.

This isn’t difficult for me, because I began the 1970s as a genuine conservative activist. My politics shifted left, slowly, during the decade, but I still voted for Gerald Ford in 1976, and still refused to support Carter in 1980. (Sorry, Jimmy.)

What conservatives saw during that decade was just what liberals see today, in reverse. In the 1970s conservatives saw a natural majority growing, with power tantalizingly out of reach. Democrats in 1977 held all branches of government, as Republicans do now, and were very optimistic about putting their program into motion.

Where Tesla is Wrong

Let’s step away from politics for a week, maybe a year.

Let’s talk, again, about business, about technology and about the future.

Let’s talk about Tesla.

I like Tesla. Most business analysts don’t. But I admire Elon Musk. I even think he’s right to buy SolarCity.

But I think the namesake product has a limited runway. Here is why.

The story of the Tesla car is a three-legged stool.

• There’s the electric angle. Don’t just save the planet, but recycle energy from the Sun, through the battery. Just as important, deliver a car with far fewer moving parts, so it won’t wear out. An electric motor has very few moving parts. A Tesla car is basically a drivetrain. If you replace the batteries, keep the drivetrain maintained, and change things like tires and wiper blades you’re good.
• There’s the performance angle. The Tesla’s electric motor can deliver enormous power to the drivetrain quickly. Its “ludicrous speed” goes from zero to 60 in nothing flat. The sleek design screams sports car. This is a car that has always been compared to high-end luxury vehicles, or sport vehicles, and has won in that niche. It’s had to compete there to justify its price.
• There’s the self-driving angle. Musk promises that you can ignore the car in a few years, and for now just keep an eye on it as you go down the road under the control of your GPS. It will avoid collisions and go where you want it to go.

Solving The Problem of Abundance

Everyone is vulnerable to fighting the last war, and ignoring the conditions of this one.

For investors and policymakers, the great fears remain the currency and the money supply. I read it in every Seeking Alpha discussion thread, a pervasive fear that we’re about to be crushed because no one is going to believe the promises of the dollar, or that we’re running out of something essential whose lack is going to make our dollars worthless.

What this decade has shown, already, just halfway through it, is that those fears are baseless. The problems of scarcity have been replaced by the problems of abundance. There’s too much oil, too many commodities, too many cheaply manufactured goods on the market. There are too many devices, there is too much cloud, there are too many good movies and shows out there and not enough time to see them all.