So what? Well, none of this could have happened 10 years ago. Not only that, you would probably wouldn’t have understood the paragraph in the slightest because it contains words and actions no one had heard of. Had I told you in 1992 that in 20 years, virtually anyone would be able to speak in wireless real-time video to anyone else on the planet, even to the point of sharing a real-time digital experience, you would not have believed it.

And if I had added that the technology was not outrageously expensive, but rather being carried around in the pockets of students and commuters everywhere, this would have seemed too outrageous for science fiction. What amazing force in the universe hath rained down such blessings on us mere mortals?

The truth is that we all live in a world today that would have been unimaginable to us only very recently. It is so much woven into our lives that we don’t think about it much anymore. And contrary to the rap on the digital age, that it is all about geekery and gadgetry, the real driving force behind this innovation is the flesh-and-blood human being and the oldest desires known to humankind (such as wanting to stay in touch with family).

Another quick example. I was emailing with a U.K. choir director two nights ago, and I mentioned a book of chanted music. He hadn’t heard of it, so I sent him a link, from which he downloaded the material (that magic click that creates a copy!). This morning, his choir sang the piece in church halfway around the world, and he let me know that it was fabulous.

Here we have it: digits flying over oceans in a matter of seconds, and then embodying themselves in beautiful music, sung now with the same human energy as music was sung in the ancient world, that transforms real lives. The person kneeling to prayer didn’t know and didn’t need to know how the music arrived there. The technology is just the means; the end is the improvement of human life.

Such cases like this are only a tiny snapshot of two things I can briefly recall. Just today so far, I’m sure I’ve read articles I never would have seen, talked with people I would have long ago lost touch with, found out about events that would have remained forever unknown to me, connected with someone who found something I said interesting enough to consider…and just now, I recall that I heard word that a friend with asthma is out of out a Shanghai hospital all safe and sound. None of this would I have known only a few years ago.

Again, ask the question: What is causing all of this amazing change? What is the driving force, the source of the manna, the wellspring of all this avalanche of human progress?

I’ll tell you what is not causing it: politics. It’s the great lie, the most-gigantic drain of valuable human energy ever conjured up in the mind of man. What is politics but a grand argument about how we should rule each other? Meanwhile, every step forward in history has come not from this task, but a completely different one.

American politicians are always running on a platform of change. They explain how their policies will make your life better. They map out timetables. They present a portrait of a future. Above all else, they presume that the future is theirs to control, and voters often go along with this idea. As an example, look no further than the history of the State of the Union address.

What if none of it is true? Just think about education. Everyone has a plan for how to improve what exists. So it has been for a hundred years. Meanwhile, the private sector, through physical and digital technology, is reinventing the entire enterprise from the ground up through every possible means. This decentralized, private-sector-driven, technologically sophisticated education reform is making it almost impossible not to be educated about something with each passing hour.

Online academies are opening by the day. Universities are putting their courses online for free. For-profit companies are distributing every manner of teaching tool one can imagine. For-profit learning centers are opening in every town, all making a buck from teaching kids what the public schools have failed to teach. For that matter, the History Channel alone offers more sweeping programs than any public school textbooks two generations ago.

Anyone in the world can be a teacher to the world today, with a laptop and an Internet connection, and so, too, anyone can be student.

It’s true in health care reform, too. For all the problems in the pricing system and terrible insurance system, health care is getting better, mainly due to private-sector innovations. The best radiologists in the world can examine your scans in minutes, no matter where they actually happen. Access to medical information is no longer trapped in a dusty book but flies all over the world from hand-held devices. Error is more likely to be corrected this way, saving and changing lives.

Society is not waiting for the politicians. When you listen to what they say, when you watch what the bureaucrats do, when you look at what the agencies are regulating, you suddenly realize that the political monstrosities that burden the world are hopelessly out of touch with the kind of progress that people are experiencing in their daily lives now.

Politicians can make the world a worse place, to be sure. But if you look at the actual trends that are driving change in a positive direction in our world today, none of them is inspired by political initiative. They take place outside the public sector, and even outside the purview of the politicians and bureaucrats. Sometimes it seems as if the political class is clueless that the world has long ago moved on.

What is driving the world in a forward direction? It is people connecting with people through free association, communication, money exchange, enterprise, risk taking, commercial aspirations and the practical arts. And from these forces, we are newly discovering the wonderful fruits of civilization: arts, music, philosophy, faith.

And truth. Truth above all. The truth that is all around us, the one that the public-sector machinery somehow cannot and will not see, is that global society is making a future for itself without the help of the world’s self-described public servants. The state in all its manifestations struts and preens — builds monuments to itself and waves its flags — but when it comes to really making change, we must look elsewhere.

Regards,

Jeffrey Tucker

How Change Happens was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Historically, however, these technological advances have rarely been recognized and welcomed when they first appeared. For the most part, they have been doubted by the general public. Most people didn’t understand the specific technology and believed, despite all historical evidence, that scientific progress had finally leveled off. Often, powerful institutional forces resisted and attacked these emerging disruptive technologies.

Progress, however, cannot be contained. This was true even when the technologically advanced world comprised only the United States and few other developed nations. Today, with an international economy growing more rapidly than America and looking for ways to catch up, it is even more true.

Take, for example, nuclear power. While reactionary anti-nuclear Luddites have managed to slow deployment in America, they failed in France and Russia. Now these states are moving rapidly to the next level, exploiting the vastly superior thorium nuclear potential to serve a rapidly increasing worldwide demand for electrical power.

Think about that. People who have more oil than they could ever use are developing nuclear energy. America, which imports vast quantities of petroleum, is squelching domestic oil production and nuclear power deployment.

Recently, we’ve learned that China, which is already building 25 new reactors, has launched a thorium program as well. By 2020, China plans to have 40 mega-reactors that will produce more electricity than all of America’s 104 plants combined.

In America, you can already sense a growing anger directed at the new age fantasists who promised us an economy powered by windmills, solar panels and corn ethanol. When gas prices hit $5 a gallon, you’ll see, up close and personal, how market forces trump ideology.

If, however, half the money that had gone into worthless climate research and ridiculous subsidies for disastrous technologies like corn ethanol had gone toward nuclear energy production … well, never mind.

Governments and social forces have never, ever succeeded in bottling the genie of innovation permanently. Railroads, automobiles, electrification, telephones, radio, television, computers, the Internet and mobile electronics were all mocked as temporary or unimportant fads when they first emerged. Then, seeing they weren’t going away, these technologies were declared a mortal threat to civil society by powerful interests vested in the old technological status quo.

My associate Ray Blanco, whose ancestors are from Spain, likes to cite a common invocation used by the privileged aristocracy of that country. Toasting or saying goodbye to a friend, they would assert, “Que no haya novedad.” Roughly, this translates as, “Let no new thing arise.”

This was the unstated, but futile, motto not only of the old aristocracies. It was the sincere desire of the print media as the Internet destroyed the newspapers’ monopoly over ad revenues. It’s, evidently, the core philosophy of the existing educational establishment as it fights a bitter losing battle against decentralized new-media education. I could go on.

The real danger involved in trading transformational companies does not come from fluctuations or macroeconomic trends. Innovation always overpowers business cycles.

The danger is that a new technology will be leapfrogged by some unexpected newer technology. In fact, this is the danger inherent in all transformational investing. A transformational technology can be made irrelevant by an even more transformational technology.

Let me give you a theoretical example. We know that thorium nuclear power is set to leapfrog conventional uranium-based reactors. Of this I have no doubt. On the other hand, there are some very smart people working on small-scale fusion. Many of these people are so obsessed with this quest that it borders on a mental disorder, so there’s no way to judge their odds of success. If they do succeed, however, it will make thorium far less important.

(It would also, incidentally, be enormously beneficial for other companies in our portfolio.)

We know that some of our stocks will fail, but a diversified portfolio of true transformational companies is, historically, the surest source of true transformational wealth. Moreover, we know from studying the great investors of history that those who implemented this strategy most successfully were long-term investors. They bought and ignored their holdings even during periods of severe fluctuation.

They understood that, ultimately, market forces always win out over politics and the unpredictable psychology of the stock market. Science moves forward, and those who have faith in human innovation reap the benefits.

Regards,
Patrick Cox
Whiskey & Gunpowder

February 25, 2011

Bet on Transformational Technologies to Trump Political Ideology was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

The health care bill was a cliff. It had become tainted with Chicago-style pressure politics, industry and congressional payoffs, secrecy, profligacy and policy confusion. When the Democratic Party stronghold of Massachusetts elected a Republican senator to the “Kennedy seat,” Obama’s progressive agenda fell into the abyss.

The president then magnified his losses by countering the Massachusetts loss with a populist attack on the very banks he had bailed out. He proclaimed that he would increase regulations on banking institutions. Exempted, of course, were his beloved quasi-governmental agencies Fannie Mae and Freddie Mac, whose fraud and corruption cascaded us into the current Great Recession. Worse, he promised to raise taxes to “get our money back” from a still unsteady financial industry.

The stock market dutifully and predictably plummeted 500 points. Even loyal supporters in the media, who swallowed the administration line concerning the boondoggle stimulus package, broke ranks. If I had to bet, at this point, my money says Obama joins Jimmy Carter on the list of one-term presidents.

I’m writing about this stuff because of the financial consequences, and the news is very good. I never doubted that America would eventually rein in the big spenders and return to fiscal sanity.

I predicted a hard tack to the center when Barack Obama was elected. I also predicted that the health care takeover would not succeed. I didn’t predict, however, that this failure would be so hard and so fast.

The reason I was wrong about the timing was that I didn’t expect him to abandon his centrist campaign promises so completely. I had assumed that he would govern as a pragmatic opportunist, not one of Eric Hoffer’s “true believers.” And I lost faith in my own judgment regarding health care, believing that some watered-down version would pass. Even that outcome is now in serious doubt.

Regardless, the consequence of this shift is extremely positive for the economy and investors because the administration’s ability to expand government has been abruptly curtailed. After unnecessary and public humiliations over the Chicago Olympics, Copenhagen and Massachusetts, the president’s currency is looking a lot like the Venezuelan bolivar.

While the president promises to double down and keep fighting for his progressive goals, Democratic moderates are abandoning ship. Rep. Marion Berry of Arkansas, for example, is only one Democrat who has decided not to run for re-election in this climate of backlash. He now openly mocks the president’s belief that he can prevent a massive shift to the Republicans in the 2010 elections.

So let’s discuss the benefits of these developments. Primarily, we will now see a coalition of Republicans and moderate Democrats grow in power. This means that the most radical of the administration’s legislative goals, cap and trade and a government health care takeover, are almost certainly shelved.

This is extremely good news because cap and trade was an economy killer even in good times. Moreover, it would have had no impact on climate. I believe, as do many scientists shut out of the corrupt U.N. process, that CO2 does not drive climate change. Even if you believe it does, however, many environmentalists have pointed out that the legislation would have no appreciable effect on CO2 levels. Cap and trade was always about raising taxes and delivering control of industry to the intellectual classes.

Incidentally, China and India have confirmed what I predicted. They will not sign even the toothless Copenhagen climate accord. This is the final nail in the U.N.’s effort to institute global governance based on climate concerns. Interestingly, the Indian media credit the vote in Massachusetts for their government’s decision to repudiate the U.N. power grab.

I can’t express how happy this makes me. Economic growth is the only solution to the enormous debt overhang that has been foisted on us by both our political parties. It’s also the solution to most of the developing world’s challenges. Like it or not, all economies have been globalized to one degree or another. Growth in Asia and South America will have beneficial impacts on your portfolio.

We can now expect the administration to start talking about the economy. Unfortunately, the enormous pork-barrel stimulus package and the debt it has entailed has already depleted the fiscal arsenal. Fortunately, two-thirds of the so-called stimulus package has not yet been spent. If Obama were to support the repeal of that spending and institute tax breaks, he could probably accomplish the same thing that JFK did when he faced a lousy economy. A CNN poll just showed that 56% of Americans favor doing so.

It is particularly meaningful that Nebraska voters forced Ben Nelson to take the special advantages he won for the state from the health care bill. Americans are clearly willing to forgo politically gotten gains. Obama himself is now talking about “deficit reduction,” though starting a year from now.

Without spending cuts that I doubt he will support, that’s a synonym for “increased taxes.” The Tea Party movement, which now has higher voter approval than either major party, probably won’t allow that to happen.

Incidentally, it has taken one of the most liberal representatives, Dennis Kucinich of Ohio, to point out the damage liberals have done to themselves by disparaging that movement. He said, recently, “I met with people who were unfairly ridiculed as being just a bunch of Teabaggers and, frankly, they had basic economic concerns just like everyone else, they felt that government wasn’t listening to them, and this is where the Democratic Party better wake up.”

Whether or not one agrees with the movement, the individuals have been alienated by those who insulted them, and this includes the failing media as well as the president.

Anyway, the bottom line is that we’ve turned an incredibly important corner. The delusion that the smart kids could solve all our problems if they just had enough power has been brought back under control, at least temporarily. We will pay the price for the foolishness of the last decade for some time, but lessons have been learned.

I hate to be the optimist in the crowd, but I predict that people will look back in a few years at this as an enormously positive time. Breakthrough technologies will have powered investors and the economy to new financial heights.

The weakness of economists is that we cannot imagine the true nature of exponential growth. In my lifetime, I’ve seen enormously intelligent economists consistently underestimate the ability of free peoples to solve problems. They are making that mistake again now.

Significantly, these lessons are being learned all over the world. The Obama administration’s message has always been that America should be more like Europe. This is contrary to the message of other great Democrats, like JFK. America took that turn toward European-style mixed economies. We did it disastrously with our banking system and then unsuccessfully with health care. And the world has noticed.

If you’d like a little pick-me-up, there’s a great article in The Economist. An excerpt: “America’s most vibrant political force at the moment is the anti-tax Tea Party movement. Even in leftish Massachusetts, people are worried that Mr. Obama’s spending splurge, notably his still unpassed health care bill, will send the deficit soaring. In Britain, where elections are usually spending competitions, the contest this year will be fought about where to cut. Even in regions as historically statist as Scandinavia and southern Europe, debates are beginning to emerge about the size and effectiveness of government.”

My old friend Leonard Read, who brought Austrian economics into the U.S. and funded Ayn Rand when she was writing her first novel, had something to say about times like this. Paraphrasing, he said that three steps forward in human progress are inevitably followed by two steps backward. Yet thousands of years of history have shown that those two wrong steps are always followed by another three that lead to increased freedom and prosperity.

It’s nice to be moving in the right direction again.

Regards,
Patrick Cox

January 28, 2010

Massachusetts Makes Far Left Democrats Think Again was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

The minority reality (let’s call it The Long Emergency) says that it is necessary to make radically new arrangements for daily life and rather soon. It says that a campaign to sustain the unsustainable will amount to a tragic squandering of our dwindling resources. It says that the “consumer” era of economics is over, that suburbia will lose its value, that the automobile will be a diminishing presence in daily life, that the major systems we’ve come to rely on will founder, and that the transition between where we are now and where we are going is apt to be tumultuous.

My own view is obviously the one called The Long Emergency.

Since the change it proposes is so severe, it naturally generates exactly the kind of cognitive dissonance that paradoxically reinforces the Status Quo view, especially the deep wishes associated with saving all the familiar, comfortable trappings of life as we have known it. The dialectic between the two realities can’t be sorted out between the stupid and the bright, or even the altruistic and the selfish. The various tech industries are full of MIT-certified, high-achiever Status Quo techno-triumphalists who are convinced that electric cars or diesel-flavored algae excreta will save suburbia, the three thousand mile Caesar salad, and the theme park vacation. The environmental movement, especially at the elite levels found in places like Aspen, is full of Harvard graduates who believe that all the drive-in espresso stations in America can be run on a combination of solar and wind power. I quarrel with these people incessantly. It seems especially tragic to me that some of the brightest people I meet are bent on mounting the tragic campaign to sustain the unsustainable in one way or another. But I have long maintained that life is essentially tragic in the sense that history won’t care if we succeed or fail at carrying on the project of civilization.

While the public supposedly voted for “change” this fall, I maintain that they underestimate the changes really at hand. I’m far from convinced that Mr. Obama really sees the kind of change we are in for, and I fret about the measures he’ll promote to rescue the Status Quo when he moves into the White House a few weeks from now.

Where We Are Now

Without reviewing all the vertiginous particulars of the year now ending, suffice it to say that the US economy fell on its ass and that the “global economy” did a face-plant as well. The American banking sector imploded spectacularly to the degree that investment banking actually went extinct — as if a meteor landed on the corner of Madison Avenue and 51st Street. The response by our government was to shovel “loans” onto the loading dock of every organization that pretended to be something like a bank, while “bailing out” an ever-longer line of corporate claimants with a pitiable song-and-dance. The oil markets went on a roller coaster ride. The housing bubble collapse grew to avalanche velocity (taking out whole colonies of realtors, mortgage brokers, and construction contractors in its path), the commercial real estate sector developed hemorrhagic fever, retail drove off a cliff on Christmas Eve, the stock market fell in the toilet, jobs and incomes went up in a vapor, and tens of millions of ordinary citizens addicted to revolving credit found themselves in a life-and-death struggle for the means of existence. None of this is over yet.

The Year Ahead

Much of what has been lost in 2008 will not be recovered: enterprises, personal fortunes, chattels, reputations.

I expect a period of euphoria to mark the early weeks, perhaps months, of the Obama team. It will be a relief to have a president who speaks English correctly and has experienced something like real life prior to politics. Restoring credibility and legitimacy in leadership will be a big deal. If nothing else, we may recover a collective sense of consequence from a president who tells the truth, even the harsh truth. The age when it was enough to claim that “mistakes were made” might be over. A sign of this sort of change may be the commencement of prosecutions for misdeeds in banking and securities that are now destroying the entire system of deployable capital. A good place to start will be an investigation of Henry Paulson for insider trading stemming from Goldman Sachs’s shorting of its own issued mortgage-backed securities when Mr. Paulson was the company’s CEO. Beyond his case, there should be enough work at Attorney General Eric Holder’s office to employ a line of law school graduates stretching from Brattle Street to the planet Mars. It will be salutary for the nation to see those who engineered the banking collapse come to greater grief than the mere surrender of their Gulfstream jets and Hamptons villas. By the way, being allergic to conspiracy theories, I don’t believe for a minute that there is some kind of shadow elite of “Bilderburgers” standing in the background to protect these grifters — and I also believe the reason these paranoid notions persist is because it is otherwise hard to account for the extravagant irresponsibility of the Bush circle and its servelings.

Apart from “cleaning up Dodge,” so to speak, and from issues of collective character-and conscience-in-office, I worry that the avalanche of troubles already ongoing will overwhelm Mr. Obama and his people. It’s also well worth worrying whether they will pursue policies similar in kind to the ones pursued by Bush, namely throwing money at everything and anything, and it sure looks like they are planning to do just that. I am especially concerned about an “infrastructure stimulus” project aimed at highway improvement at the expense of public transit. This would be the epitome of a campaign to sustain the unsustainable. We need to begin planning right away for a transition away from automobiles, not in order to be good socialists but because Happy Motoring is at the core of our unsustainability trap. The car system is going to fail in manifold ways whether we like it or not, and it will fail due to circumstances already underway. For one thing, it will cease to be democratic as the remnants of the middle class find it impossible to get car loans, or pay for fuel, or insurance, and that will set in motion a very impressive politics-of-grievance setting apart those who are still able to enjoy motoring and those who have been foreclosed from it. Contrary to what you might make of the current situation in the oil markets, we are in for a heap of trouble with both the price and supply of petroleum (more on this below). And there is no chance in hell that any techno rescue remedy to keep all the cars running by other means will materialize.

A consensus in the blogoshpere says that the stock markets will rebound strongly during the first Obama months. This is possible just on the basis of pure “animal spirits,” but the Obama Bounce will occur against a background of continued dismal business and financial news. It will appear to defy that news. By May of 2009, the stock markets will resume crashing with the ultimate destination of a Dow 4000 before the end of the year. Meanwhile, jobs will vanish by the millions and companies will go bankrupt by the thousands, especially in the so-called service sector, and in all the suppliers of such, along with the landlords in all the malls and strip malls. The desolation will mount quickly and will be obvious in the empty storefronts and trash-filled parking lagoons. In the event, two things will become increasingly clear to the nation: that the consumer economy is dead, and that there is no more available credit of the kind that Americans are in the habit of enjoying.

Regards,
Jim Kunstler

January 1, 2009

Forecasts 2009 was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.