Contrarian Idiocy

A friend passed on this link to me of a post by a Cato commentator. He’s arguing that buying local food is, counterintuitively, not such a great thing for the environment.

Here’s his main logical technique:

A tomato raised in a heated greenhouse next door can be more carbon-intensive than one shipped halfway across the globe.

Right. By the same logic, trees grown locally that are used to make clubs to kill children are worse for child welfare than ones grown by child slaves. Indeed, people can do terrible, environmentally irresponsible things locally that outweigh the benefits of having done them locally.

But: doing agriculture locally brings all those effects close to home. When agriculture is being done in your backyard, all of a sudden you notice the methane gas produced by feed lots, the erosion caused by poor soil use, and the run-off from poisonous fertilizers. It’s a lot harder to do bad agriculture locally than it is to do it somewhere far away, where it’s actually performed by little brown people whose cancers matter to us less than our own. In fact, the grow-local farmers I know are moving closer to biodynamic practices that only grow foods in the correct seasons, anyway. No heated tomatoes.

These seemingly sensical counter-intuitive arguments are a technique; they are not information. They are devised to reframe and trivialize the debate. You’ll find them created to argue against progressive taxation, against addressing climate change, and against almost anything that challenge the illogical logic of the market.

My point: When reading a counterintuitive argument, check the logic first.

Writers and Alcohol

Last winter I gave an interview to the NY Post about writers’ favorite cocktails. Looks like they finally ran the piece.

“Real writers don’t drink cocktails. Real writers drink straight liquor. You’ve got to be able to dose it properly. When I was a drinking writer, I would write with a bottle of sipping whisky with me. But very few of us are still drinking writers. Writing has been divorced from some of its essential chemicals…”

Testament is Complete

The complete Testament series, with annotation, is now available in four trade volumes from Vertigo/DC Comics. They’re in stock at most comics shops, and shipping from Amazon or other regular bookstores before the end of the week.

Testament 1: Akedah
Testament 2: West of Eden
Testament 3: Babel
Testament 4: Exodus

I’m delighted to see them all available at the same time, so that the whole story can be read and comprehended as a single experience. Yes, even the real Torah gets read mostly in weekly portions, but this story – which depicts a near-future plagued by a war over oil and a technologically enabled, viral global currency – definitely works better in book form than it did in individual pamphlets. Plus, DC let me add commentary, explanations, and references to these editions, which really do help readers use the story as a starting place and link to some important but relatively unknown material.

4 Degrees

“We begin to have to talk about ordered retreat from some areas of Britain because it becomes impossible to defend,” he said. “There’s no choice here between adaptation and mitigation, we have to do both.” That’s what Professor Bob Watson, UK chief adviser to the Department for the Environment, Food and Rural Affairs told the Guardian today.

He was hoping to look at scenarios closer to a rise of 2 degrees celsius, but realize that this was an unrealistically optimistic projection. In fact, the rise of 4 degrees would likely lead to a cascade of other factors and subsequent further increases. But even a modest rise of 4 degrees in the near future yields hundreds of millions of deaths and requires major movements of people, the abandonment of coastal cities, and more.

Once you start looking at the adaptation scenarios, adjusting the impact of a 4-degree increase starts to appear inhumane. Can we just write off such large segments of humanity and play ‘triage’ with the food supply? It may seem heartless, but without such planning, the casualties will be far worse. Does planning in this way amount to admission of defeat? Perhaps. So while a small number of government officials and private sector workers attend to the task of setting up our administrative capabilities for climate change disasters, the rest of us can work on containing it as best as possible.

Investing Into a Dep/recession

For months now, I’ve avoided giving what can be construed as investment advice – instead answering the many queries about “what to do with my savings?” with general commentary on the state of currency, property, local investment, commodities, and debt. This hasn’t stopped the queries for specific ideas on what to do with retirement savings, college savings plans, and other “real money” people are worried about.

Apocalypse scenarios aside, there are real, “traditional investing” things I believe people can still do with their (remaining) money to weather the continuing economic crisis. There’s two main goals to investing: capital appreciation (making money) and capital preservation (not losing money). And strategies for accomplishing these two things aren’t necessarily the same. Now that the economy is pretty sketchy, people’s homes are worth less, there’s less money to spend, businesses can’t borrow easily, and basic resources are costing more (because money is worth less), it’s one of those times when capital preservation might be more important than great winnings.

Still, there’s probably a few ways to win relative to others (which is the way our racetrack investment markets work). Here’s some of my ideas. I’m not a broker, and I’m not suggesting you do any of them.

1. Preferred stocks and similar bond-like corporate issues.
When big corporations want to raise money, they issue special shares and special bonds that are traded on the open stock exchanges – but they earn guaranteed dividends. Years ago, for example, GM issued a bunch of 25-dollar shares under the ticker symbol RGM, with an interest rate of 7.25%. As GM’s regular stock value has declined, so has the value of these bond-like shares (called “senior notes”). They’re now selling for under 10 bucks; but they still get the 7.25% interest based on the original 25 dollar price. This means that bought today, they earn over 17% interest. And this isn’t a dividend paid at management’s discretion; it’s a payment that can’t be cut unless GM goes bankrupt.

Now that’s a possibility, for sure. GM could go bankrupt. But even though oil may be over, automobiles probably aren’t. As electric vehicles and battery exchange stations replace gas guzzlers and gas stations, GM will still likely producing vehicles. And even if you hate GM and what they represent, buying these shares doesn’t give GM any money – they already got the 25/share when they first sold them. (You will have to like GM enough to hope they don’t go out of business, though. If that’s too much love for the corporation, find another similar out-of-favor high-paying instrument.)

There’s a bunch of these kinds of ‘senior notes’ and ‘preferred shares’ out there. All you need to do is pick one with a really crazily high rate, but from a company you think will not go bankrupt. The company does not need to do well at all over the next decade. They just need so survive – and you get 15% interest or better. Once the storm has passed, the price of the shares should go up, as well. If you know of reasons why these investments truly suck, please post below. I am longing to hear the ‘catch’ that I’m missing about this too-good-to-be-true investment.

2 – Gold. The recent 20% decline in the price of gold probably represents a good opportunity to pick some up. The easiest way is an exchange traded fund that buys gold, like GLD. This would be more a “preservation” play than an “appreciation” play.

3 – Water. The trick here is invest in companies helping making the water supply cleaner and more accessible – not companies profiting off starving developing nations of their rights to their own water. And this is harder to figure out than it looks. So far, of the water funds I’ve researched, the Claymore Global Water (CGW) seems the most invested in companies that are doing exploration, research, desalination, sewage treatment, and other activity to improve global water resources. Some of the other funds are more involved in activities you probably wouldn’t want to be supporting.

4 – Alternative Energy. T Boone Pickens and GE are both staking their futures on alternative energy. It’s really hard to pick individual companies to invest in, though, because you never know exactly which solar panel and windmill strategy will turn out to be the most efficient. Better to support the entire industry I think, especially in hopes of an Obama administration that prefers wind and solar over nuclear (plutonium and uranium are limited resources, themselves) and pointless off-shore drilling. I found an exchange-traded fund called WilderHill Clean Energy (PBW) which has done abysmally of late – but that might just mean this is a good moment to buy in. Other ideas?

5 – Currency. This one is hard, and I’m not doing it myself. The idea I had was that even if all money is becoming less valuable compared with real things, different currencies are probably descending at different rates. So you should be able to make money going to a site like Forex.com and investing in currency ratios, say, USD/NZD. In the short term, the US dollar is strengthening relative to the NZ dollar, which has had a good run for the past year or so. So if you owned an instrument like USD/NZD, it would increase in value as long as NZD got weaker faster than the USD.

But currencies are deeply strange, and moved around by people looking to exploit interest rates of different countries. The reason why the NZD went up so much is that Japanese (who get basically no interest on their savings) were investing in NZD bank accounts in order to earn some interest. This only works for so long before the currency shifts. In short, it’s really hard to know what currencies are going to do, and betting on their movements is tricky.

6 – Debt arbitrage.
Now Suze Ormond might disagree, and this is probably irresponsible. But if I had a mortgage at a good rate, I probably wouldn’t want to pay it down with savings. I’d be better off earning 10 or 15% on a good bond and paying 5 or 6% on the mortgage. This is profit of 10% just for doing nothing – which is the way capitalism works for people with capital. If someone is in that position, and leveraged with a low-rate mortgage (instead of a high rate credit card) I’d think they’d want to use the money they were allowed borrow at a great rate, rather than pay it all back.

My personal advice is to do whatever you’re going to do and get over it. Unless you’re going to be a professional trader, just get back to work doing the thing you really do.

Of course, you’re welcome to post your own ideas to the comments below. Nothing I’ve said (or that you say) should be construed as professional investing advice. We’re just real people sharing our thoughts on how to save for our kids’ educations.

Real Social

Just three or four years ago, when I had just published my “business” book Get Back in the Box, most organizations still thought of the Internet as a distraction from their core competency. They saw interactive media as a marketing opportunity, and little more. At the time, I could only conclude that on some level businesspeople understood that engaging with the Internet in any real way would force an openness for which they were still unprepared. Competency on the American business landscape is down; any form of transparency would just expose the dearth of expertise at the company’s core. Most real processes had already been outsourced to the lowest bidder, so the only way companies had of distinguishing themselves was marketing.

Outsourcing scandals, economic tightening, a long hard war, and a declining currency have forced everyone to reconsider this strategy. Though the shift has been motivated by tough times, I’ve been glad to see so many companies, organizations, and even political campaigns attempting to embrace the “real” Internet and cultures making it up. Instead of just buying banner ads or conducting new forms of computerized market research, many of these players are coming to understand that the Internet is a social phenomenon – not a content revolution – and that it offers the opportunity to connect to a real culture and its most competent members in a real way.

At the same time, most of them either fail to recognize the full impact that an Internet community can have on their ethos and operations, or they do recognize it and fear it. That’s understandable. When the Obama campaign says it’s here to listen and enact the will of its constituency (“we are the change”), they get a constituency prepared to have its will enacted. This is a great thing, but it also presses their hand. When BP announces it wants a conversation with environmentalists about how to get “beyond petroleum” (also a great thing) the green press accuses the company of “greenwashing,” while its shareholders (another constituency) get up in arms. When Apple asks its users to consider themselves part of the Jobs family, all these brothers and sisters get upset when Jobs doesn’t tell them that he’s struggling with a disease. This is not to say that the initial efforts to engage broader constituencies in honest conversation is wrong – it’s quite right. But it demands a level of honesty and breadth of participation foreign to companies used to doing public relations in a traditional and controlled fashion. So most companies either abandon their efforts, or limit them to superficial displays of Internet savvy that they hope will get covered in secondary media.

Going “social” online means more than hiring a company to create a ‘white label’ version of Facebook for your organization to chat with customers, employees, shareholders, and others. It means understanding the real value of creating a “transparent” company; it means understanding why sharing and collaborating beat hiding and competing; it means learning to work with unfamiliar measures of success – like how many new unsolicited resumes from people looking to join you come over the transom, instead of just how many “unnecessary” jobs could be cut.

Becoming a truly interactive company goes deeper and wider than starting up a new server, which is why I’m glad an old friend of mine, Jeff Dachis, is starting up a new company dedicated to helping organizations of all kinds implement an interactive communications infrastructure, and helping them understand just what everyone has to gain. As I’m arguing in the book I’m currently working on, organizations have for too long looked to generate value by extracting energy and resources from the periphery. And this bias has been supported by an economic model and currency system based in scarcity.

Embracing the social means embracing the abundant – and emphasizing instead the way an organization might actually help people on the periphery generate value for themselves. Google AdSense, eBay, Paypal and Amazon associates are just the first primitive nudges in that direction – conducted by almost completely ‘virtual’ companies who still have little understanding of the cultural forces they’re playing with. Once traditional, non-internet companies begin to realize they’ve been social enterprises all along, things will start to get truly interesting.

Jeff told me that his approach to social networking that he hopes to spread was inspired – at least in part – by some of what I wrote in Get Back in the Box. And he asked if I’d like the chance to help him put some of those ideas into practice. Like raising my child using the principles I outlined in Playing the Future, it’s something of a challenge: to put my theories into practice with living people instead of just pondering them in the ultimately safe realm of non-fiction writing.

So I’m taking him up on the challenge, and going to start engaging with some of the organizations he gets to the table. This should be an interesting opportunity to effect some change – or at the very least learn more about what prevents it. I’ll keep you posted on what transpires.