MichaelWFerguson.Substack.com grew 72% last week. While that is impressive growth, the subscriber base is still very small in absolute terms. It needs to be much, much bigger if it is to disrupt the Left and Right narratives. That is my goal. They both need to be disrupted. They both tell a self-serving story rather than the truth.
Growth is usually comprised of a linear component related to general exposure and an exponential component related to virality. Consequently, I am not sanguine about our growth without some sort of promotion. I have tried Facebook ads and the cost per new subscriber is prohibitive. So, I still have a challenge in front of me, if our readership is ever to become large enough to matter.
Oil & Gas Now, But Geothermal Is the Future
With oil prices way up and supply threatened to be constrained by political tensions, oil and gas are definitely a major topic in both the Right and Left MSM silos. However, neither are getting the story correct. The short term solutions to crushing energy prices are different than the long term solutions but neither are what you might suspect nor as you are being told.
Joe Biden won the U.S. Presidential election and immediately oil prices took off. While the conflict in Ukraine is causing 'uncertaintity inflation', most of the price increase before and after the Russian military action in the Ukraine is simply a matter of the market behaving rationally. The concept is pretty straightforward. The Biden Administration's hostility toward hydrocarbons caused them to take steps to constrain supply. That simple fact, alone, caused prices to rise.
It is a matter of what it typically referred to as a vicious cycle. Oil producers have some flexibility in how much oil they pump. The logic is simple. If I can pump my oil today and be paid $35 per barrel or I can keep it in the ground until next year and sell it for $70, which do I do? Clearly, I keep it in the ground and that decision, alone, lowers supply and causes upward price pressure. As an oil producer this fulfillment of expectations alone, convinces me that I should continue to keep my oil in the ground. As long term contracts expire, I am reluctant to enter into new ones. So, the price of oil continues to climb.
It is true that the restrictions that the Biden administration has placed on exploration and development will, over time, actually reduce supply and because of that, producers will be reluctant to pump at lower prices. However, right now, the dynamic is primarily one of price expectations driving supply down and prices up.
Fortunately, it works in the other direction as well. If the Federal government loosens supply constraints, general expectations will cause oil prices to fall from their current price of over $100 to, say, $50. This will convince oil producers that they should pump and sell oil now before prices fall. Since this, alone, will cause supplies to increase, prices will fall which will just further convince the market to start pumping as fast as possible. By doing so, they fulfill their own prophesy.
In a recent speech, Biden actually 'said the quiet thing out loud'. They are encouraging high gas prices because it makes alternative energy sources more cost competitive and thus, they believe, it will accelerate the transition to alternative energy sources. There is more quiet part still not being said. That is that with alternative sources, energy prices in general will never return to the low prices of the recent past.
The long term alternative energy future, while optimistic, is not what is currently being peddled. The future is actually dominated by geothermal, ocean power and, only third, nuclear power. Those are all base load energy sources and 'peak shaving' energy supply will involve stored energy utilizing many technologies, including solar and wind, but also including natural gas and some biofuels. The driving force behind this diversity of energy sources, as today, is locality and politics.
Enhanced Geothermal Systems (EGS) is simply a matter of drilling a hole down to hot rock, pouring water down the hole and getting steam in return. It is a simple and functionally limitless energy source. Why isn't it being touted loudly? Because there are vested interests behind other energy sources that promote them and EGS lacks powerful sponsors. That can shape the midterm, but in the end, history shows that the best solutions almost always win.
How is EGS kept in the background? By a studied and intentional lack of imagination that will convince the casual observer that it is not feasible. For example, Europe has a 'technical potential' of around 7,000 GW which is several multiples of Europe's energy usage. However, the 'sustainable potential' is reported at around 35 GW, or a small fraction of current total energy usage. What is the difference between technical potential and sustainable potential? It is primarily the result of the assumed reservoir. In other words, if the rock is porous, the water you pour down the hole will create a reservoir of large size, so that a lot of heat can be extracted in a short time. If the rock isn't porous, the rock that is exposed to the water (which is turned into steam) is cooled off and the resource must wait until the natural thermal conductivity of the rock reheats it.
There is a similar problem with nonporous rock with oil and gas, except it is a matter of the resource flowing to the drill hole in order to be extracted. We have solved this problem with fracking. Fracking will also work with EGS and is being explored. Of course, as it was with O&G, it is being fought.
I am currently writing a white paper on a hypothetical Polymathican microstate. In it I propose that the primary energy supply should be an open cycle OTEC (Ocean Thermal Energy Conversion). I do so for several reasons. First, it is a local energy source that takes geopolitical considerations out of the mix. Second, it produces prodigious quantities of fresh water. The location, Samana Cay, Bahamas, is uninhabited primarily because of a lack of fresh water. Third, it is more easily scalable to the population size than many of the potential energy sources. The geology of the Caribbean does not make it suitable for EGS.
There is a couple of takeaways, here. First, high oil prices are primarily a market phenomenon that results from the Biden Administration's hostility toward hydrocarbons. Once a new, more oil friendly U.S. government is in place, prices will fall as they rose on expectations. The Ukraine conflict is causing Russian O&G to be diverted to China who will rely less on Middle East oil and it, consequently, will be sold to Europe. While there is mid-term disruption, once the delivery systems are in place, supply won't be a problem. Second, the long term energy picture is very positive and supply will be even more diverse than today, with EGS replacing hydrocarbons as the primary source.
WEF, WHO and Davos
This past week the World Economic Forum held its annual meeting in Davos, Switzerland while, simultaneously, the World Health Organization convened in Geneva, Switzerland to create a global health response treaty. In the U.S., on the Right, observers such as Steven K. Bannon have gone so far as to identify a 'Party of Davos' and declare that they represent a Global Elite that is attempting to take over the world. It has been seen as a bit 'tin foil hat', but in a Davos speech, the founder of the WEF, Klaus Schwab, stated quite clearly that he perceives Bannon's statement to be true. In other words, it is not a 'conspiracy theory' because they quite openly admit that they are manipulating the world for its own good.
This conspiracy theory of a Global Elite that secretly controls the world is far from new. When I was a young adult, it was the Trilateral Commission that was secretly controlling the world. Then, in the 1990s, it was Bilderberg. Actually, the World Economic Forum was started in the same time frame but only recently has come to be the dominant NGO. I have always been conflicted about the existence of these organizations. On one hand, they represent a threat that coordinated, undemocratic organizations may exercise undue influence over communities and force an unnatural global homogeneity. On the other hand, powerful people around the world acting unilaterally is also dangerous. They should be talking with each other, but they also should respect regional and local differences.
Last year, Xi Jinping gave a rousing speech in which he rather blatantly presented a vision of the world where a Global Elite, led by the Chinese, would rule the world for the benefit of all the world's citizens. Without placing the Chinese in a position of preeminence, Klaus Schwab, this year essentially concurred. One panelist overtly stated that while the global elites are cooperating to an unprecedented degree, the local hoi polloi are not buying into it.
In that observation, she appears to be spot on. There is, in fact, a developing a conflict between Globalism and National Populism. The Globalists make the argument that since the threats and opportunities of an Information Age world are global, local autonomy is counter productive. The Nationalist Populists argue that a Global Elite will enforced unnecessary cultural homogeneity and render the individual powerless to exercise personal sovereignty. While the Left and Right MSM will argue one side or the other, the reflective person will likely, as I have, come to the conclusion that they both have a good point.
What conclusion should we draw from this? My position is that humanity, as a whole, has not yet found the proper balance between collectivism and individuality. Also, they will not likely do so in the contemporary environment of mutual antagonism. The empowered MSM of the Left demonizes Donald Trump, Nigel Farage, Marine Le Pen, Victor Orban, et alia. Why? It is not because they are generally evil. It is because they are resisting the formation and empowerment of a Global Elite.
The French Right has been vociferous in stating their commitment to the preservation of French culture. I support that; it has been one of the great cultural centers in all history. While Donald Trump has emphasized economic and geopolitical provincialism, he is certainly not blind to the distinctive American cultural identity that was forged in the 20th Century. I am sympathetic with this, as well. As a world traveler, I do not see it as a net positive that everywhere I go, there are McDonald's, KFC and Domino Pizza. Local flavor is why you go. The Nationalist Populists should not be demonized. They have a point that true diversity should not be given short shrift as we create the future of humanity.
On the other hand, Globalism does not necessarily create an oppressive monoculture. It is possible to coordinate without falling prey to groupthink. This year at Davos, much to my surprise, Henry Kissinger articulated a perspective on the Russia-Ukraine situation that was surprisingly close to mine and certainly at odds with the collectively promulgated messaging of Davos. Essentially, he said that Zelenskyy needs to accept that Donbas and Crimea simply do not want to be part of a Western facing Ukraine and that they should negotiate an agreement of independence. So, some diversity of thought seems to be allowed within the WEF, but there is no doubt that the demonization of Putin and the lionizing of Ukraine and Zelenskyy which is WEF's consensus opinion is not threatened. This is obviously a danger implicit in the concept of a Global Elite; one viewpoint can run roughshod over other viewpoints and there may be no mechanism by which minority opinions can find meaningful expression. In other words, there is a meaningful risk of a tyranny of the majority and, if brought into existence, there is no obvious escape.
In the final analysis, this boils down to the question of, in a highly complex world of local, regional and global power structures, at what scale should the ultimate sovereign power reside? There is no clear cut answer and no satisfactory solution will be found when the undeniable tension between collectivism and individualsm is ignored.
Give it some thought. Even though it is generally being ignored, this is one of the great questions of our time.
Pareto is Not a Conspiracy
There is a surprising observation that the ratio .8ⁿ:.2ⁿ seems to describe a large number of natural and human social phenomena. When n=1, it is commonly referred to as the 80-20 Rule, but over its whole range is referred to as The Pareto Distribultion. A fundamental problem with the current interpretation of Western, Enlightenment Culture is that it embraces a notion of equality that conflicts with the reality of Pareto.
Simply put, in performance based environments, such as sales, publication of peer reviewed papers, various skill oriented games, etc., the distribution is not equal but, rather, conforms to a ratio of
Xⁿ:(1-X)ⁿ where X=.8 most of the time. Pareto, himself, noted that a bucket of peas will have 80% of its peas in 20% of its pods. It has also been noted that the size of meteorites follows a Pareto distribution. Nobody is going to seriously suggest that the distribution of natural phenomena are the result of any kind of restriction of opportunity. Pareto also applies to results in human organizations and it is an uphill battle to put forth a discrimination argument.
As I state regularly, free enterprise is very efficient (some would say optimally so), but it is heartless. An economy that operates on a strict Pareto distribution will result in 50% of the population receiving just 0.68% of the income and wealth. In other words, without mitigating forces, Pareto will create a handful of winners and an enormous number of losers. While the economic inequalities created by Pareto may be natural, they are certainly not advisable.
First, communities, whether small or large operate through implicit social contracts. That is true even in those communities that are not the least bit democratic or liberal. It is nearly universally understood that some minimum economic condition is required before a citizen feels properly cherished. Right now, both North America and Europe are experiencing large immigration of economic refugees. If people don't achieve a certain standard of living, they will leave, if they can. If they can't, they are likely to riot.
Second, the hoi polloi are not just workers, they are all consumers. If the bottom 80% make too much money, the 20% will see their profits decline because of high labor costs. However, if they make too little money, the 80% make bad consumers and that hurts sales for the 20%. So, these two considerations tend to be balanced to create the optimum situation and the maximal income for the 20%. This, actually, was the great revelation of Henry Ford who, by the one decision to pay his workers substantially more, instigated the great economic growth of 20th Century America.
Third, the very wealthy are not quite as avaricious as the hoi polloi imagine. Even the 19th Century 'robber barons' such as Carnegie, Mellon and Rockefellar gave very large amounts to philanthropic activities. Today, the 'Giver's Pledge' has over 200 billionaires who have pledged to give at least 50% of their wealth to charity. To be sure, we can find examples of people possessing great wealth and power who seem indifferent to the plight of others. However, that is not the norm and the elites as a group do, in fact, care about the economic well being of the average person. Today, many of the largest companies are setting internal minimum wages that are much higher than what has been set by governments.
The politics of Western civilization is dominated by the Left who views income disparity as a sign of unequal opportunities and the Right who, frankly, view it as a sign of indolence. Neither position is defensible. For the most part, income inequality is the result of differences in educational attainment which is primarily the result of differences in cognitive ability.
So, while economic disparity may not be evidence of oppression, it is also the case that we, as a civilization, do want to mitigate poverty for both ethical and practical reasons. The problem is that implementing anti-poverty programs can have negative and unintended consequences.
Arthur Laffer has made the observation that, while reducing economic disparities is a laudable goal, it comes with a price. When one raises more taxes from the wealthy, assuming you are successful, you disincentivize them because the proceeds from their productive efforts is lessened. When you give the proceeds from taxing the rich to the poor, you disincentivize them because they don't need to work to receive purchasing power. This is why I say that increasing economic security lowers income on a society wide basis. It may still be advisable to do so, but one should be cognizant of the trade-off.
So, to summarize, Pareto seems to naturally cause income and wealth inequality and mitigating that inequality comes at a price to society as a whole. Still, it is a laudable goal and it is a topic that really needs to be discussed responsibly and not be made a partisan issue.
White Paper
My intention is to create and disseminate a weekly newsletter of approximately 3,000 words that will address matters of current significance. This most often will be discussing 'sins of commission' but will sometimes be 'sins of omission', i.e. the press should have covered a topic and they didn't. However, there are issues that are too big for a 1,000 word essay but too small for a book. In these cases, I may publish a 'white paper'. I am working on the first right now covering a topic about which many people have expressed some interest.
The last of a trilogy of books I am plannng is 'The Rise of the Microstate'. After dealing with important fundamental issues in 'A New Enlightenment: Information Age Political Philosophy' and 'The Death of Capitalism: Information Age Economics' I will undertake a detailed examination of how microstates will evolve from the disintegration of large nation states, how they will differ, and how they will interact with each other. However, as basic research into that book, I have designed in great detail a Polymathic microstate, located on the uninhabited Bahamian island of Samana Cay. It is assumed to have a population of about 250K.
The design process includes matters of urban design, governance, geopolitics, economics, culture and sociology. Aware that I have been creating this hypothetical polymathic microstate, some peope have asked about when I might make the design public. I was thinking that it would come after the publication of 'The Rise f the Microstate'. However, that won't be for years and I can, in fact, publish something now. Naturally, right now I will simply assert things that I will support later. But, I think that is better than leaving it to the end.
It will be published for 'supporters', but I will elaborate on that later.
As always, I encourage you to forward this newsletter and, if you are receiving it as a forward, to register at MichaelWFerguson.Substack.com
