nick baily's two cents

A Tiny Apartment Turns Into 24 Rooms

Favorite video in a long while. New Yorkers could learn a lot from this architect, check out the Optimus Prime impression by the apartment walls: 

 

"A counter argument that has been gaining some ground..."

That's a similar title to the last post, but this blog post in specific drew my attention. 

A counter argument that has been gaining some ground goes like this – if the rich are responsible for so much of the problem, we should work with them to solve it... does this general approach make sense? Is it pragmatic? 

“Most people see this as a reason to loathe the affluent, but wouldn’t it make more sense to see them as an enormous opportunity to create fast and dramatic change for global warming? If the 20% well-to-do offset their CO2 emssions by 50%, that would mean an overall decrease of 40%.” 

Everything within me rankles at this suggestion, but I wonder if I’m just to idealistic? Can the wealthy really just buy us out of this mess?

A very good question. Any new approach is bound to be met with skepticism. But new ideas are never without controversy, and it's heartening to see people who are naturally skeptical give a fair hearing to a novel approach. We're all on the same page -- climate change is almost certainly the greatest existential threat any of us have faced since the end of the cold war. 

It's not going to be easy, but it's going to require open minds and pragmatism, and it's great to see a glimmer of hope that all of us working towards the same goal can recognize that and act accordingly.

Scarcity as the new paradigm

I was trading emails with a very smart friend of mine recently who had this to say:

There is no stopping the growing price of oil over the long haul, and there are no realistic alternatives to an oil-based economy. As a result, in my opinion, currencies over the next 10-25 years will largely be pegged to the value of oil, their dependency on oil / supply of oil, and the resulting health of their economy. Using this as one of many lenses to evaluate opportunities, the US economy is fucked. We have people that commute 80 miles to work in a car.

It's a point of view you're hearing more and more of these days. But I don't agree.

In the short term there is extremely low price elasticity for oil demand. In other words a modest increase in demand causes massive swings in price. It's this dynamic that has been driving the market recently.

However, the world can and will adjust for oil that is much more scarce. As my friend notes above it will make it impossible for people in the US to drive 2 ton SUV's 80 miles to work each day. It will also have major effects on global shipping, just in time business models, massive flows of cheap plastic goods
from Asia, and a lot of other things.

But I would strongly disagree that "currencies over the next 10-25 years will be largely pegged to the value of oil." And I don't think the U.S. economy is fucked. At least not forever.

The next 1-5 years may be rough. I think it's correct to say we've entered a new era of resource scarcity that's not just going to end. But over a 5 year period demand elasticity for oil is non-trivial -- and over a 25 year period almost anything is possible.

There are substitute goods for oil past the short term. There are ways to massively reduce consumption and divert to alternate forms of energy. For some things like air travel it's really hard. For things like home heating oil it's not hard at all.

For auto travel -- which fairly or unfairly tends to get most of the attention, as it's such an integral part of our lives -- it's a medium term shift that requires things like building rail lines, and people changing their habits and where they live.

What bothers me about the gloom and doom set is that I know this can be done in a generation, easily. I know this because we've already done it.

We built the interstate highway system almost entirely from 1950-1970, and we can build its replacement just as fast or faster. If we want to. And when the incentives line up, well then we'll want to.

Let's put it this way, if we could go from most people living in rural areas, to cities, to suburbs, all in about 100 years, we shouldn't be shocked if resource incentives cause another round of shifts over a 25 year
period. That's a long time, it's more than a generation. It's worth considering the change in living habits and demographics from 1925 to 1950 for some context.

The United States continues to be an incredible place for innovation. We have real problems that affect competitiveness (health care, infrastructure, and education high among them) but the economic capacity of the US is still astounding.

Betting that the US will cease to be wealthy and relevant isn't a bet I would take.