Choosing Profits Over Planets

From the Mouths of Boobs

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 ~ "What good is it to save the planet if humanity suffers?"

So said CEO Rex Tillerson at Exxon's annual meeting yesterday. What really concerns him, of course, is less the suffering of humanity than the suffering of diminished profits. The right choice between the planet and profits? Yes! More money! Never mind that there is no business to be done on a dead planet. Or that you can't take it with you. Or that dispensing with the Earth, our only home, is somehow a reasonable option in service of unbounded cupidity. But then T. Rexx has some puzzling beliefs.

Mounting Disasters

More Billion-Plus Dollar Losses

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 ~ The number and severity of economic losses from extreme weather events has been on the rise for years:

Several interesting things pop out from this graphic:

• Droughts and heat waves (yellow) have increased in number, although the typical size of each event was higher in the previous decade.
• Wildfires (red) are increasing in number
• Tornadoes (purple) have dramatically increased in number and severity.
• Hurricanes (dark blue) have also increased in both number and severity; it is not yet clear whether the last few years suggest a return to "normalcy" or just a brief respite in a worrisome trend.

Total damages are on the rise, and losses over the past decade exceeded half a trillion dollars. Given concerns about budget deficits, reducing that expense would be a worthwhile object of public policy discussion.

While direct linkage to climate change is notoriously difficult to prove in individual cases, the overall picture over the past 20 years cannot otherwise be easily explained. Engaging in puerile finger-pointing and self-interested politics is not befitting those we expect to provide leadership for the country as a whole.

Another Kind of Oil Rig

I'm Shocked. Shocked!

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 ~ Ho hum. Another case of a rapacious global corporate cartel caught doing what comes naturally.

European officials are investigating BP, Shell and Statoil for fixing the price of oil. The US may do so as well.

[UK Energy officials] said manipulation of the oil price could have driven inflation and pointed out that the market is an important benchmark for many financial transactions.

High oil prices also feeds through to bigger bills for food, clothes and other essentials because it pushes up the cost of transport and manufacturing.

A high oil price will also fuel inflation, which erodes the value of people’s savings, and can stifle economic growth, by pushing up businesses’ costs.

The economic impact of artificially inflated oil prices is huge; $20T worth of oil is priced from the Brent crude index, a focus of investigators. As with the LIBOR rate fixing scandal, it turns out the largest players "report" prices which are then aggregated and used as the benchmark for everyone else. What stops them from playing games with those reports? Nothing, except apparently the danger of being caught due to an excess of greed.

Another Market Failure

Heads I Win, Tails You Lose...

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 ~ When oil is cheap there is little incentive to develop and commercialize biofuels or other liquid alternatives. Especially since they largely remain generally more costly than conventional hydrocarbons.

But when the price of a barrel of oil rises, alternative energy fuels will surge, right?

Actually, no:

Metro Transit's Funding Gap

Slow Starvation

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 ~ Once again, Metro Transit has a revenue shortfall.

And once again, the proposed solution is to cut service, and further diminish pubic transit.

It's a vicious circle, or perhaps more accurately, a death spiral. As routes are cut or curtailed, the overall utility of the system suffers as well. As the system becomes less useful and timely, people use it less, and revenues from the fare box decrease.

Lather, rinse, repeat.

Conversely, increasing service and making transit more available, more accessible, and especially, more affordable, increases ridership. Public transit use has been increasing locally; we should be building on that, not thwarting it.

Metro Transit needs additional funding. Cost cutting is but a slogan, not a real, considered solution that would make a (positive) difference. Fully funding public transit increases use of the system, promoting urban vitality, reducing congestion and air pollution, and improving our quality of life. In fact, public transit should be free; the costs and benefits are very favorable compared to alternative public expenditures, particularly car infrastructure.

There is a public hearing tomorrow afternoon.

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Also posted to Fare-Free Northwest blog.

Startup Salaries

Which Risks to Take?

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 ~ How much should startups pay in salaries?

One line of thinking, advanced largely by rookie angel investors and those who have never worked in a startup, is... nothing. The justification? A need to "conserve cash" so the startup can maximize the length of its runway, the period of time it can continue operations (and take self-sustaining flight) before the bills can no longer be paid.

This idea is, simply, wrong. It is behaviorally naive, financially simple-minded, and legally dangerous. Here's why:

Is it Investing or Speculating?

Don't Ask YourBroker

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 ~ The word "invest" has become debased.

We hear so much about the supposed importance of investor confidence and about the need for low taxes on investors, and all because, the pundits aver, we need investors to invest so that the economy can grow and solve all of our problems.

Bunk.

Tax and Spend

Or is it "Borrow and Spend"?

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 ~ Tell me again who's spending is out of control? Recall that in 2000 we were running a budget surplus, with the prospect of those continuing for years...

Is Entrepreneurship Cyclic?

Should It Be?

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 ~ The number of people starting businesses or styling themselves as entrepreneurs rises in difficult economic times. When the economy improves, as it is perhaps now doing here in the US, such "entrepreneurs" bail out, rejoining the mass of (temporarily) comfortable wage slaves according to the Kauffman Foundation. Some fret that a decline in new entrepreneurial business is worrisome, even though the economy overall is improving, but this misses the more fundamental point; our future economic health is not tied to the growth of entrepreneurial startups, but to the growth of entrepreneurs.

What about the legions of "fairweather" entrepreneurs eager to return to the vanishing and fundamentally ephemeral security of the big company sinecure?

You were part of a trend like jean jackets and spandex, and so long as it was cool you were on board...

Sustainable Investment

Growing Worldwide

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 ~ Environmental, social or governance concerns are incorporated in the selection or management of more than $13T of professionally managed investments according to a new report issued under the auspices of new group Global Sustainable Investment Alliance.

Nearly 22 percent of professionally managed assets around the world can be considered sustainable or responsible, according to a finance industry assessment, the first comprehensive look at the subject.

Critics question the rigor of such terms as "sustainable"; a more accurate total might be less than 22% considering the temptation towards greenwashing that still persists in many a hidebound industry.

“It is a huge problem that there are no set criteria used by industry today to define ‘sustainable’ practices or investments – on what basis are these claims being made and who has vetted any such criteria?” [said] Anuradha Mittal, the executive director of the Oakland Institute... “Investment is necessary, but only if investment criteria are first vetted by local communities, to incorporate labour, environmental and social concerns. Given that no such standards exist, and given that corporate accountability remains a major difficulty, this is extremely problematic. We need to see that investment is actually elevating communities and natural systems, because that’s what the world needs.”

Whether 22% or a smaller figure, there is a better question than one of methodology or definition.

Why are 78% (or more) of all investments unsustainable, irresponsible, or both?

Why Renewable Energy?

Lower Cost, Lowered Volatility

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 ~ Furniture and home furnishings retailer Ikea plans to double spending on renewable energy to $4B by 2020. The PR value is probably great, but saving money is the driver:

The additional spending on projects such as wind farms and solar parks will be needed to keep expenses down as the company maintains its pace of expansion, Chief Executive Officer and President Mikael Ohlsson said in an interview in Malmo, Sweden.

“I foresee we’ll continue to increase our investments in renewable energy,” said Ohlsson.

Ikea plans to get 70% of its energy consumption from renewables by 2015, and 100% by 2020. Not only are wind and solar approaching or reaching grid parity in many places, they provide pricing stability and predictability for businesses, something not provided by volatile oil prices.

Anti-Debt Clock

"Pay Your Damn Taxes"

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 ~ The US Debt Clock, which tracks total US national debt, is the passive voice of fiscal alarm—it doesn't name the subject who inflates that debt. Debt happens! The Anti-Debt Clock is the active voice—it names the wealthy and corporations as major contributors, and quantifies their influence in real-time.

Washington State leads the nation in regressive taxes—the gulf between the heavy tax rates on the less well-off and the wispy rates on the wealthy. Yet we are told by the austerity caucus that we must redress our fiscal problems on the backs of those least able to afford it. That's not fixing the debt; it's fixing the system.

Breaking the Grade Barrier

Food is Food

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 ~ Food is still nutritious even if it doesn't look like the food in a carefully staged advertisement. How picky are we as consumers?

Maybe we’d be willing to buy a slightly smaller apple that only has 37 percent red coverage instead of the requisite 40 percent needed to qualify as the “fancy” grade that stores usually buy (yes, it’s actually measured). Maybe we consumers would even consider it a score to get a bag of Pink Lady apples for just 69 cents per pound.

Since I'm a home gardener and grow (some of) my own food, I'm already less focused on impossibly picture-perfect produce anyway. When you grow your own, it's often smaller (zucchini excepted) and sometimes not as beautifully colored or proportioned. It might even have pest damage! Horrors!

But it's still tasty, nutritious, maybe even organic! If you've ever worked in or patronized a food bank, you've seen food like this all the time. And if you care about sustainability, minimizing waste, and living more closely in tune with your environment, it's easy to take that first bite.

Are College Degrees Worth It?

For Most? No

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 ~ We always hear about the importance of getting a college degree, and how it correlates with much higher lifetime earnings. But, as the financial people are always quick to say, the past is no guarantee of future performance, and the current performance of college degrees is dismal indeed.

At left is an excerpt from an infographic from Frugal Dad on college costs. (The original is quite large, but worth looking at it; click to see in its native habitat.) Increasingly, a college education only has direct financial value if one treats it specifically as vocational training. Want to be an engineer? Got get a degree in computer science or EE. Want to study art? You're better off organizing your own reading and gallery tours, perhaps with a trip to the great museums of New York and Europe. Want to go into business? Become an entrepreneur.

College has other benefits to be sure, but the ballooning costs and the crushing debt load are not worth it for most future workers. It is no longer a ticket to the top rungs of the economic ladder. There is a bubble forming in college attendance, rising costs, and rising educational debt, which is unique in that it cannot be discharged in bankruptcy.

I'm not sure when it will pop, but like any bubble, it eventually must.

Climate Change Flooding

Jakarta is Under Water

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 ~ "Analysts worry the flooding could affect economic investment."

Ya think?

The Infrastructure Fairy

Where Does Infrastructure Come From?

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 ~ Is economic infrastructure necessary?

Of course it is, but like air to breathe, many only realize its indispensability by its unexpected and unwelcome absence.

Imagine any of the many things you or most other Americans do every day—take a hot shower in the morning. Hop in the car and go to the store. Turn on the TV to watch a show. Take your dog to the park.

In any of these activities, and countless others, we rely on infrastructure—roads, bridges, water supply, sewers, electrical grids, telecommunications—to make them possible. Water from your tap, heat, powering electronics, paved streets, safe bridges, public security, readily available food and many other things don't happen without the infrastructure that enables it. Private enterprise may grow and deliver food to a market, investor-owned utilities may generate electricity, and companies may produce the cars we drive and the media we consume, but they don't build and maintain the infrastructure that enables their accessibility to us all.

Welfare Incentives—III

Dependency

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 ~ No question there are those who rely on handouts for their very survival. That said, there is equally no doubt that some at street corners and freeway off-ramps sporting "God bless" signs aren't begging, but are earning a living, or even supplementing one.

Legions of corporate persons engage in a similar exercise, infesting the off-ramps (and on-ramps) of Capitol Hill, making lofty (if vague and unprovable) claims about jobs as they buttonhole lawmakers in search of hand-outs. God bless!

Debt Favors

The Method of Impoverishment

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 ~ We will soon suffer the endless Kabuki of sham fiscal cliff politics. It will be frustrating and feckless in appearance to most of us, but the wealthy and powerful will be well-served. We are in the midst of an economic struggle for survival which Warren Buffet famously characterized so:

There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning.

And how are they doing that?

Load economies (governments, companies and families) with debt, siphon off their income as debt service and then foreclose when debtors lack the means to pay. Indebting government gives creditors a lever to pry away land, public infrastructure and other property in the public domain... The aim of financial warfare is not merely to acquire land, natural resources and key infrastructure rents as in military warfare; it is to centralize creditor control over society.

How Green is Your Bailout?

I'm All Right, Jack

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 ~ Who will get the bailouts in the next crisis? Or in the sausage that comes out of the Congressional factory in the next ledge down the fiscal cliff?

Tracking Consequences

Let's Get Empirical

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 ~ The inaptly named fiscal cliff has been (temporarily) averted in a deal that, in part, raises taxes on the so-called job creators.

We've been hearing for years—decades even—that higher taxes on the rich would cause them to stop hiring and investment.

Now that their taxes have gone up, let's all pay attention to see whether they actually throw that petulant fit they've been threatening for so long. I'm guessing not.