The sacred mystery of capital - Prospect Magazine

Summary:
Julian Gough compares capitalism and modern economics to religion. The advance of science has removed the divine mystery from much of life, but in the past 30 years, the advance of free market capitalism has put it back. Only modern economics can now provide forces that we don’t understand. Modern high finance, like the Latin of the Christian Church, has profound mysteries at its core. Not even bankers know what a collateralised debt obligation cubed really is. The abandonment of the gold standard in 1971 was the crucifixion and resurrection of capitalism; the traumatic and liberating event which allowed capitalism to be purely religious and entirely driven by faith. As with all religions, once its link to the physical world was severed, free market capitalism mourned briefly, then experienced a surge of energy and expansion. From "fiat lux" to “fiat money.” But as with all religious expansions, success bred hubristic dementia. The elevation of metaphysical above physical turned into a kind of contempt for the physical. (Published: July 2008)

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Five most important lessons I've learned as an entrepreneur - Guy Kawasaki

Summary:
Guy Kawasaki gives a list of five things he learned from being an entrepreneur: focus on cash flow; make a little progress every day; try stuff; ignore the schmexperts; never ask anyone to do something that you wouldn't do. (Published: 18/08/08)

Notes:

1. Focus on cash flow
• cash is what keeps the doors open and pays the bills
• paper profits on an accrual accounting basis is of no more than secondary or tertiary importance for a startup
  
2. Make a little progress every day
• wrong: big-bang theory of marketing
• fantastic launch that creates such inertia that you flow to "infinity and beyond"
• press writes about "overnight successes" because they seldom happen, not because that's how all businesses work
  
• correct: make a little progress every day
• making product slightly better, increasing your skill in one small way, closing one more customer, ...
3. Try stuff
• wrong: better to be smart than lucky, because if you're smart, you can out-think the competition
• correct: luck is a big part of many successes
• two consequences
  
• don't be too bummed out when you see a bozo succeed
• luck favours the people who try stuff, not simply think and analyze
  
4. Ignore schmexperts
• i.e. the bad combination of schmucks who are experts, or experts who are schmucks
• when you first launch a product, they'll tell you it isn't necessary, can't really work, faces too much competition, ...
  
5. Never ask anyone to do something that you wouldn't do
• goes for customers to employees
• e.g. "fill out these 25 fields of personal information to get an account for our website"
• e.g. "fly coach to Mumbai, meet all day, and fly back that night"
• if you follow this principle, you'll almost always have a good customer service reputation and happy employees.

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Lessons from a “lost decade” - The Economist

Summary:
Some major differences between the US housing bubble and Japan's bubble in the early 90s are overstated. They were comparably severe, and the Japanese policymakers were not slower than American ones to cut interest rates and loosen fiscal policy after the bubble burst. In a way, the US is even more exposed than Japan was, due to a much lower savings rate among the population (more difficult to prop up consumer spending). There are a number of advantages the US today has over Japan back then. The US regulatory system, financial markets and political structure are more transparent, pressing banks into recognising losses and repairing their balance-sheets quicker. The cost of its housing bust is spread across other countries, with foreigners holding a large slice of American mortgage-backed securities and sovereign-wealth funds have provided new capital for American banks. American exports are booming, thanks in part due to a cheap dollar. (Published: 21/08/08)

Notes:

• Japan's decade of stagnation
• followed property bubble
• burst in early 1990s
• was fueled by cheap money and financial liberalisation
• people assumed property prices could not fall nationally
• when property prices fell borrowers defaulted and banks cut their lending
• result was decade with average growth of <1%

• some difference between US and Japanese situations are overstated
• no major difference in relative size of property bubbles
• America's house prices actually rose more and are likely to fall further
• Japanese home prices have since fallen by just over 40%
• American prices already down by 20%, many economist expect another 10%
• Japan's commercial property boom was smaller than America's
• Japan had stockmarket bubble bursting year earlier than in property
• hurt banks, because they counted part of their equity holdings in other firms as capital
• but its impact on households was modest, because only 30% of the population held shares, compared with over half of Americans.
• Japanese policymakers not slower than American ones to cut interest rates and loosen fiscal policy after the bubble burst
• BoJ began to lower interest rates in July 1991, soon after property prices began to decline.
• discount rate was cut from 6% to 1.75% by the end of 1993
  
• two years after American house prices started to slide, the Fed funds rate has fallen from 5.25% to 2%
  
• Japan gave its economy a big fiscal boost
• the cyclically adjusted budget deficit increased by an annual average of 1.8% of GDP in 1992 and 1993
• similar to America’s budget boost this year
• Japan’s monetary and fiscal stimulus did help to lift the economy
• after a recession in 1993-94, GDP was growing at an annual rate of around 2.5% by 1995
• but: deflation also emerged that year
• pushing up real interest rates and increasing the real burden of debt
• from here on that Japan made its biggest policy mistakes
• in 1997 the government raised its consumption tax to try to slim its budget deficit
• with interest rates close to zero, the BoJ insisted that there was nothing more it could do
• only much later did it start to print lots of money
• America’s inflation rate of above 5% is an advantage
• not only are real interest rates negative
• inflation is also helping to bring the housing market back to fair value with a smaller fall in prices than otherwise

• in a way, America is more exposed than Japan was
• when its bubble burst in 1991, Japan’s households saved 15% of their income
• by 2001 saving had fallen to 5%
• helped to prop up consumer spending
• America’s saving rate of close to zero leaves no such cushion

• monetary and fiscal relief were necessary but not sufficient to revive Japan’s economy
• missing ingredient was a clean-up of the banking system
• on which Japanese firms were more dependent than their American counterparts
• Japanese banks hid their bad loans beneath opaque corporate structures, and curtailed new lending to profitable businesses
• vicious circle developed, whereby banks’ bad loans depressed growth which then created more bad loans.

• America's regulatory system, financial markets and political structure will not let it procrastinate for so long
• has a more transparent regulatory structure which presses banks into recognising losses and repairing their balance-sheets
• even if regulators were slow to recognise that the banks were shifting risky securitised assets off their balance-sheets in the first place
• over the past year, American banks have been quicker than those in Japan in the 1990s to disclose and write off losses and raise new capital
• in Japan it took a long while before the political will was there to use taxpayers’ money to plug the banking system
• big test for America’s Treasury will be how quickly it recognises the need to nationalise Fannie Mae and Freddie Mac, the teetering mortgage giants

• Americ's advantage over Japan
• America is spreading the costs of its housing bust across other countries
• foreigners hold a large slice of American mortgage-backed securities
• sovereign-wealth funds have provided new capital for American banks
• America’s booming exports have helped to support its economy
• thanks to the cheap dollar
  
• in contrast, the yen’s sharp appreciation after Japan’s bubble burst hurt exports at the same time as domestic demand was being squeezed

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Finding the Mess Behind the Mess - The New York Times

Summary:
According to Tyler Cowen, the US is unlikely to experience a lost decade as Japan did in the 1990s, but there will still be a long and protracted process of recovery. Number of problems in the real economy are underlying the financial crisis, and will remain once the financial crisis clears up. Problems faced by the US economy: lack of personal savings (people have for years treated rising asset prices as substitute for personal saving); credit crisis stopping banks from investing our savings and making loans; lower consumer spending, need to produce for export; still excess of homes in the market; energy prices. Further fiscal stimulus and excessive banking regulation will make things worse. Solving these problems will be like untangling a bunch wires: need to carefully pull the right wires, in the right sequence. (Published: 23/08/08)

Notes:

• Japanese recession in 1990s
• set off by bursting real estate bubble
• took economy more than a decade to resume steady, noticeable growth
• unlikely to happen in the US
• but will still see protracted process of recovery
  
• may take longer than the usually year or two to climb out of recession
• usually a crisis in the real economy behind every financial crisis
• based in some underlying structural deficiency
• even if financial crisis is bottoming out, sooner or later the real crisis must be faced
• problems in the US economy
  
• fundamental problem in the US economy:
• for years people treated rising asset prices as a substitute for personal savings
• as long as your home's value rose every year, you didn't have to set aside so much from your paycheck
• if your stocks went up, so much the better
• asset prices haven't been rising much lately
• many people will need more savings for their retirement or possible emergencies
• second problem
• US economy enduring a credit crisis
• many banks trying to raise more capital and make fewer loans
• savings are good for the economy when they lead to investment, but there is no guarantee that financial institutions will be allocating capital efficiently
• third problem
• lower consumer spending
  
• will require the US economy to make some shifts
• may mean fewer Starbucks and fewer new homes, but more tractor production for export to foreign markets
• shifting some consumption to investment probably beneficial to the economy in the long run
• in the short term, may mean job losses and costly readjustments
• fourth problem
• still excess homes on the market
• housing prices need to fall further
• such price declines make banks less solvent and thus worsen the credit crisis
• politicians would like to moderate this fall in prices, prolonging the adjustment process
• fifth problem
• energy prices
• high prices will encourage conservation and cleaner energy alternatives
• but: voters want low gasoline prices and winter heating bills
• politicians see lower energy prices as a way to help the economy in the short run, and as a way to win votes
• evolution of energy prices may not follow any kind of desirable logic
• danger that the Fed will view high energy prices as a sign of permanent inflation and tighten the money supply growth prematurely

• what should policy makers do?
• counterproductive path: further fiscal stimulus in form of tax rebates
  
• can raise consumer spending and bolster economy in the short run
• works only by pushing consumers to spend rather than to save
• merely postpones the needed adjustments by providing a grab bag of goodies at exactly the wrong time
• another danger: excessive bank regulation
• regulatory structure for financial institutions has failed in the current crisis,
• change is in order
• but shouldn't reform in a way that will discourage bank lending and weaken the tie between savings and investment
• banks already allergic to very risky mortgages
• we shouldn't overreact by punishing them for past mistakes
• regulatory reform needs to be forward-looking rather than focused on penance
  
• recipe for success likely requires, in ht right combinations and in the right sequences
  
• smooth adjustment into new growth sectors
• more savings from disposable income
• cleaning up the housing mess
• well-functioning energy markets
• more effective financial intermediation
• but: neither the government or the Fed can control this process
• Fed can add regulatory and monetary clarity, but there isn't any magical bullet

• Japanese failed to break out of their recession quickly because they didn't promptly close down or clean up their bank problems
• so far, Fed and other regulators show no signs of making this mistake
• but: not enough to guarantee a successful transition
• American economy will be tested for its deftness
• test will be difficult because there isn't a single enemy to focus on
• undoing a bunch of tangled wires
• if you don't pull on the right wires in the right order, the mess becomes worse
• if you pull too hard, the whole thing can break
• but if your first pulls are good ones, the untangling becomes easier with each move
• like our economy's situation today
• if we expect too much too quickly, we'll make matters worse
• but: there's a way out of the mess, and it lies in our hands

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Profit-maximization as the sole goal of a corporation - Creative Capitalism

Summary:
Martin Wolf on the nature of the firm. "What is the goal of the limited liability, joint-stock company, the core institution of the contemporary capitalist economy?" Important distinction between the role of the firm and its goal. Role is to provide valuable goods and services, whereas its goal is to maximize profit. Different views of the firm: as a bundle of contracts, as a social organism, as having culture and history, and as having/offering meaning. Big differences between Anglo-American capitalism and capitalism in rest of the world. Differences focus on the nature of ownership of the firm, the existence of a market for corporate control, and whether or not a firm can be bought and sold. Implications for relationship with employees, efficiency and creativity. Room for enduring divergence in the forms of capitalism is bigger than those working in the Anglo-American intellectual tradition appreciate. Evidence on the (in)effectiveness of takeovers and the recent sad experiences in financial markets rather suggests Anglo-American capitalism may be on the way out. (Published: 17/08/08)

Notes:

• What is the goal of the limited liability, joint-stock company, the core institution of the contemporary capitalist economy?

• distinction between goal of the firm and its role
• role of companies: to provide valuable goods and services
  
• i.e. outputs worth more than their inputs
• great insight of market economics is that they will do this job best if they are subject to competition
• goal of the firm: profit-maximization
• or shareholder value maximization
• its more sophisticated modern equivalent
• goal of profit-maximization drives the firm to fulfill its role

• market in corporate control
  
• competitive market for corporate control forces companies to maximize shareholder value
• or at least behave in ways that the market believes will lead them to do so
• if companies fail to oblige, the company will be put “into play."
  
• thus, in Anglo-American shareholder-driven capitalism, maximization of shareholder value (as perceived by the market) must perforce be the goal of the company
• not the case in countries where a market in corporate control does not exist
• in such countries, companies must earn a high enough return on capital to survive
• but this need not be a shareholder value-maximizing return

• views of the firm
  
• company as a bundle of contracts
• Anglo-American view of the company
• contracts between the company, its employees and, quite often, its suppliers and even distributors
• many contracts relational
• cannot be written down in any precise form
• companies are hierarchies in which people engage voluntarily
• they necessarily work on the basis of trust in what is often a very long-term relationship:
  
• "I work extra hard to meet a deadline now, in return for consideration when I need to look after my elderly mother later on."
  
• for many companies, trustworthiness is an essential ingredient in their long-term success.
• company as social organism
  
• companies are social organisms created by a highly gregarious mammalian species with a unique capacity for large-scale co-operation over time and space
• companies have cultures and histories
• companies have/offer meaning
• for many of those most closely associated with them
• committed workers in successful companies do not work in order to maximize shareholder value or even to earn the largest possible living
• indeed, it is impossible to direct most companies solely by the goal of profit-maximization
• they have to be aimed at the intermediate goal of producing and developing goods and services that people want to buy and are worth more in the market than they cost to produce
• company is an entity that can be freely bought and sold
• Anglo-Saxon view
• not shared by rest of the world
• for many cultures, a company is viewed as being an enduring social entity
• e.g. for many Japanese, one can no more sell a company over the heads of its workers than one can sell one’s grandmother
• in this view, goods and services can be bought and sold.
  
• companies, like countries (or, as we all now agree, people), must not be
• if companies can be freely bought and sold, relational contracts are hardly worth the paper they are (not) written on
• relational contracts depend on continuing interaction among specific people inside the business
• rational employees will act opportunistically
  
• because they will always expect their company to do the same
• the longer and more reliable relationships are expected to be, the less likely such opportunistic behaviour is to emerge
• not necessarily the case that companies which operate under the assumption that they can be bought and sold (like GM) will operate more successfully in terms of maximizing shareholder value than those which do not
• e.g. Toyota is a better car company than GM in almost all dimensions.
  
• the failure of Japanese capitalism to achieve the highest level of productivity and sustained dynamism may have far more to with
  
• repression of domestic competition in many markets for goods and,
  
• above all, services, rather than with the absence of an active market for corporate control.
• ownership of the firm
  
• Anglo-Saxon view: shareholders are the owners
  
• rest of the world: core workers are the owners
  
• shareholders are not genuine owners
• they are merely an (ever-shifting) group of people with a claim to the residual incomes
• contribute nothing of value to the competitive strengths of the firm
• enjoy the benefits of limited liability
• are well able to diversify the risks they run
• core workers have the biggest (undiversifiable) investment in the firm
• and thus the greatest exposure to firm-specific risks
• the interests of the core workers are, therefore, paramount
• capital-market arrangements (and associated views of the firm) that enforce shareholder value maximization may make companies work less efficiently than otherwise, in terms of their primary role, by precluding a range of potentially valuable relational contracts inside the firm
• such restrictions may have powerful effects on comparative advantage
• by shifting countries away from those activities in which companies that benefit from long-term relational contracts are likely to be most effective
• room for enduring divergence in the forms of capitalism is bigger than those working in the Anglo-American intellectual tradition appreciate
• without an active market for corporate control, managements rule companies
• they also acts as a trustee for a range of stakeholders, of which core workers are the most important
• Anglo-American capitalism gives primary direction of companies to capital markets
• because these companies cannot be forced to maximize shareholder value, they can indeed undertake a range of costly “charitable”activities
• provided they do not threaten the company’s ability to survive
• one of the most interesting questions over the next generation is whether the Anglo-American form of capitalism will flourish and expand, or not
• some of the evidence on the (in)effectiveness of takeovers and the recent sad experiences in financial markets rather suggests not
• but: active financial markets do bring big benefits
• particularly in financing new companies and enforcing greater discipline on badly run businesses
• the more “Anglo-American” capitalism becomes and so the more shareholder driven
• the less “creative” it is likely to be
• the less concerned with wider social results it is likely to be

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The selfish hegemon must offer a New Deal on trade - FT.com

Summary:
Jagdish Bhagwati claims the US is again suffering from the Diminished Giant Syndrome. As a result, the altruistic hegemon has become a selfish hegemon. No longer practices what it preaches. Seeing free trade now as a costly giveaway to others at the expense of the US. Continuously asking What's in it for me? Cause for Doha talks collapse. Obama's agenda for change flawed: export protectionism. Agenda for institutional change needs to address the true causes of the anxiety in the US today: India and China exports growing; competition intensified ("kaleidoscopic comparative advantage"); ongoing technical change threatening assembly line jobs. (Published: 19/08/08)

Notes:

• Diminished Giant Syndrome
• perception of American decline
• e.g. 1980s, fear of Japan
• 19th century Britain, fear of US and Germany
• US become fearful giant
  
• typically accompanied by a switch from U.S. leadership to myopic and self-indulgent pursuit of "what's in it for us" economic policies in the world arena
• from "altruistic" hegemon to "selfish" hegemon (Charles Kindleberger)
• on back of economic anxiety in country
  
• many in both political parties see freer trade now as a costly giveaway to others at the expense of the US
• ask "what's in it for me?"
• Only an agenda for institutional change, one that addresses the true causes of the anxiety in the US today, has a chance of returning trade policy to sanity.
• failed Doha talks
  
• illustrates the collapse of American leadership
• US has been the central spoiler
• refusing to cut its trade-distorting subsidies significantly even though they are universally recognised as intolerable
• While making negligible concessions itself, the US was insisting on difficult concessions from India, made even more troublesome politically because of the insubstantial offer on US subsidies
• US has also muscled in to its bilateral preferential trade agreements (PTAs) conditions unrelated to trade at the expense of their partner nations
• does not practise what it preaches and demands
• because the labour lobbies believe that American wages have been stagnant because of competition from the developing nations
• export protectionism
  
• doubly offensive about this exercise of political muscle is that it is advanced in the language of altruism
• not: by saying frankly that it is because "our unions are worried about competition"
  
• but: by pretending that it is "in your workers' interests".
  
• An altruistic hegemon would not be playing these games; a selfish hegemon will do little else.
• Obama
• part of his agenda for change is that the US should now impose even more draconian labour requirements in future PTAs, and that the NAFTA should be revised to incorporate yet tougher labour requirements
• he is making export protectionism, and the reputation of the US as a selfish hegemon, worse, not better
• Different kind of change is in order
• must reflect a holistic view of the new reality that the US confronts
• in particular: the economic anxiety that overwhelms US workers today stems from the increased fragility of their jobs
• new reality
1. India and China today are growing and exporting rapidly
• the Gullivers in a Lilliputian world economy
• create tsunamis for specific industries where their exports concentrate
2. competition has intensified
• margins of competitive advantage have shrunk
• "kaleidoscopic comparative advantage"
• no chief executive or any of his workers in tradable industries leads a happy life any more
  
• always someone, from somewhere, breathing down his neck
  
• leads to volatility of jobs, as you have an advantage today and can lose it tomorrow.
  
3. labour-saving technical change continuously threatens assembly-line jobs for the unskilled
• assembly lines continue but increasingly do not have workers on them;
  
• they are managed from a glass cage by skilled operators whose jobs increase instead.
• Obama needs a deeper understanding of the anxiety-causing "new epoch" to define his new agenda shorn of protectionism
• McCain admirably stands for free trade but shows no evidence whatsoever of comprehending that this needs to be situated in an institutional context that requires a serious overhaul
• Who will ultimately offer us the right New Deal?

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Our Electric Future - The American

Summary:
Andy Grove calls for a strategy that can deflect our march toward persisting conflict by strengthening our energy resilience. The strategy includes a policy that favors sticky energy (i.e. electricity) with multiple sources and aggressively moving vehicles first toward dual-fuel mode and ultimately to running on just electricity. Focus in the past on energy independence was misguided: talking about “independence” in terms of one product in an otherwise seamless global economy is a contradiction. Energy resilience is what's needed instead, i.e. strengthening our ability to adjust to such changes. Because electricity is the stickiest form of energy (it stays in the land where it is produced), and because it is multi-sourced, it will give us the greatest degree of energy resilience. Shifting to electricity has the added advantage of helping to mitigate a major environmental threat. However, we can't rely on market forces alone: absence of common interests among the industry players is a major obstacle to action. (Published: 01/08/08)

Summary:

• significance of US first a supplier, and later as a consumer of oil has decline
• relative decline as a supplier accelerated in the 70s, after OPEC was formed, and again when it flexed its muscles by precipitating the oil shock
• significance as a customer started to decline in the early 90s as some of the developing Asian economies started to grow at a rapid rate, requiring prodigious amounts of petroleum
• OPEC has enormous control over its customers
• energy is the lifeblood of all economies
• availability of petroleum determines whether an economy grows or declines
• availability of petroleum determines employment levels
• in turn determines national political stability
• Project Indepedence
• kicked of by Nixon in early 70s
• goal
• “At the end of this decade, in the year 1980, the United States will not be dependent on any other country for the energy we need to provide our jobs, to heat our homes, and to keep our transportation moving.”
• dramatically failed to meet that goal
• after Nixon, president after president set similar gboals
• every target was missed
• became more and more dependent on imported petroleum
• net energy imports doubled between 1970 and 1980, and then again by 1990
• goals were unwise
• faulty goals lead to the wrong actions
• problem:
• US became more and more integrated into a global economy
• goods, information, and oil move unimpeded across national boundaries
• oil flows toward the highest bidder, just like all other goods
• talking about “independence” in terms of one product in an otherwise seamless global economy is a contradiction
• correct goal
• to strengthen our energy resilience
• we must protect the U.S. economy from interruptions in the supply of such a critical commodity
• whether those interruptions are related to natural or political causes.
  
• the appropriate aim is to strengthen our ability to adjust to such changes
• how? by increasing our reliance on electricity
• electricity: energy that sticks
• oil
• moves to the highest bidder
• Fleets of tankers carry it across oceans day and night
• natural gas
• can also move around, but with extra difficulties
• on land, it can be transported in pipelines
• to carry it across oceans requires liquefaction and expensive, high-tech ships that can carry this liquid in strong, deeply cooled containers
• electricity
• it is “sticky”:
  
• it can be transported only over land
• i.e. it stays in the continent where it is produced
• it is a multi-sourced form of energy
• petroleum, coal, wind, hydroelectric, nuclear and solar
• if one source suffers a shortage, we can produce electricity from another
• because electricity is the stickiest form of energy, and because it is multi-sourced, it will give us the greatest degree of energy resilience
• nation will be best served if we dedicate ourselves to increasing the amount of our energy that we use in the form of electricity
• transportation: hardest nut to crack
• transportation uses more than half of all the petroleum consumed in this country
• conversion will not be easy
• requires substantial growth in generation capacity as well as in the capacity and reach of the transmission infrastructure
• requires that vehicles be able to run on electric power
• with the size and weight of ordinary automobiles, current technology allows electric cars to run only 100 miles or so before their batteries need to be recharged
• many drivers can live with this limitation most of the time
• but few will find the condition satisfactory all of the time
• new technology
  
• often shows up in this manner: it is not completely satisfactory in the beginning, but good enough to get going
• such approaches are known as “disruptive technologies.”
• starting low and moving up
• waiting game
• automobile industry,
• has been waiting instead for batteries to improve until they can allow electric cars to enter the marketplace with the same driving range as gasoline-fueled cars
• battery developers
• have been waiting for demand from the automobile industry to develop before fully committing the resources required to do the job
• generation and transmission infrastructures
  
• have not been built up to service the potentially explosive demand from transportation
• our exposure to the vagaries of oil supply is growing by the month
• must accelerate conversion to electricity in a major way
• U.S. government should lead the way by requiring that a growing percentage of new cars be built with dual-fuel capability
• dual fuels
• dual-fuel cars would have both an electric engine and an auxiliary gasoline engine to augment it
• dual capabilities are often built into machines to help with technology transitions
• e.g. laptops with both wired and wireless connection
• forces of disruptive technology would eventually bring about improvements in battery technology, ultimately allowing the production of an all-electric car with satisfactory driving range
• process won’t happen quickly enough on its own
• no matter how fast the production of dual-fuel cars is ramped, replacing the bulk of the approximately 250 million cars on the roads in the United States with new cars will take a decade or more
• retro-fitting
  
• need to retro-fit the low-mileage part of the fleet first
• estimates show that converting these vehicles to dual-fuel operation, even with electricity providing no more than 50 miles of driving range between daily recharging, could cut petroleum imports by 50 to 60 percent
• a stunning opportunity
• task requires major effort and investment
• may need to apply tax incentives to offset the cost of the retrofit and couple them with deep discounts on the cost of electricity used by the vehicle over some initial period, such as one to two year
• environment
• shifting to electricity has the added advantage of helping to mitigate a major environmental threat
• shift from petroleum-based vehicles to electricity-based ones would move the locus for addressing carbon emissions from millions of individual vehicles to far fewer centralized electricity-generating plants
• controlling emissions thus becomes an industrial task, easier technologically.
• estimates indicate a potential reduction of carbon emissions of around 50 percent through such a shift
• can't rely on market forces
• automobile manufacturing, battery production, and the generation and transmission of electricity are all represented by different industries
• each with its own financial aims
• absence of common interests is a major obstacle to action
• requires the coordinated commitment of several industries
• startups and new ventures, not limited by the economic rules of established industries, can break the gridlock in time
• but: we don’t have the time
• Condi Rice: “The politics of energy is warping diplomacy in certain parts of the world”
• oil has been a major factor in many wars, and it could be again
• Kissinger: “Today’s relationship between China and the United States is very similar to that of Germany, a rising country at the turn of the 20th century, and Britain, an established one. Their conflict over resources eventually led to war.”
  
• We are in a period of time in the world today where there is a shortage of resources.
• we will face “an era of persisting conflict.”
• need for a strategy that can deflect our march toward this “persisting conflict” by strengthening our energy resilience
• policy that favors sticky energy with multiple sources and that aggressively moves vehicles first toward dual-fuel mode and ultimately to running on just electricity provides the answer.

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