The Green Bubble

How many of you remember the Dot-Com bubble?

Well, what we have going on with the “green” revolution is the late 90s all over again.

For those of you who don’t remember, the Dot-Com bubble was was the massive expansion of Internet-based business in the mid-1990s, followed by the eventual collapse of that sector around 1998.  What created the bubble?  Simple: basic human nature.  Never underestimate the power of people in deluding themselves that utopia is just within reach.

Now, the Internet is so integral in our lives these days that it is hard to believe that such a bubble could have happened in the first place.  However, compared other economic sectors, Information Technology runs at light-speed.  It’s been like that ever since the introduction of the IBM PC.  Every year, or every couple of years, the capability of technology doubles.  Much of this has to do with the fact that there is little government regulation of things like PCs, memory, hard drives, or even the Internet.  Your PC or laptop is the result of competitive market forces at their finest.

However, even this was subject to a bubble, but it had nothing to do with capitalism or free markets.  Humans behavior has been unchanged for centuries; it is almost predictable, if you watch it long enough.  In fact, all economics is based off human behavior, if you think about it.  Buying and selling, market patterns – they’re all driven by human behaviors.  And of these human behaviors, the most destructive is the capacity for people to delude themselves.  Liberalism is all based on the notion that there is truly a free lunch out there somewhere to be had.  When things are going good, lots of people seem to think it’ll last forever.  Some people think that they don’t have to work hard to get rich.  These three behaviors drive economic bubbles.

It was interesting to watch a PBS special on the Dot-Com bubble, especially looking at the businesses and the people that helped pump the thing up until it burst.  The most glaring example was a story of two women who had the idea of starting up an “eBusiness” (the term that was used back then) that sold high-end cosmetics over the Internet.  Everybody involved thought that this was THE next big thing, including the people that developed the website, the two owners (who basically did nothing but hire people to develop the website), and the venture capitalists that eventually bought the business for several million dollars.

Yep.  These two chicks – neither of whom were over the age of forty – sold their business a couple of years after their initial start-up for several million dollars.  A business that had no inventory, no real customers per se, and not much of a profit history.  The American Dream, right?  Tell me, what sounds wrong with this whole story?

Well, here are a few observations:

  1. It was a business based on an unproven concept.  Two years is not a long enough business track-record to establish profitability for anyone looking to invest who actually had a functioning brain.
  2. They had nothing but a list of customers to sell off if the business sank.  It was nothing but numbers on a piece of paper.
  3. The Internet was not what it is today.  The user base back then was a FRACTION of what it is nowadays.  And of that fractional percentage, how many of them do you think would be stupid enough to go buy high-end cosmetics?  Not many.
  4. Much of this was done before the development of things like PayPal.  Online payment was primitive at best.  Not good if you’re looking to keep your business afloat on a percentage of the revenue taken in.
  5. High-end cosmetics are usually purchased by people who are not all that technologically savvy.  Again, this was over ten years ago when the Internet was little more than a buzzword.

Needless to say, after the cyber-chicks sold the business, it collapsed.  The people who actually did the work all got canned, the venture capitalists lost a bundle, and the only people who walked away with something were the two women who started that mess in the first place.  It was good for them, but it sucked for everyone else.

But the promise of the Internet was all the rage.  Reality didn’t matter.  People wanted to invest in the promise of what the technology could do without looking at where the weak spots were.  Everyone wanted to get in on the ground floor, figuring that they’d tread water until things matured to fulfill the vision that everyone had.

And that’s how a bubble is born.  People swallow the hype, and ignore reality.  So it is with the green movement.

Solar power sound like a swell idea – pull energy from the sun.  It’s clean.  It’s eco-friendly.  It’s only 18% efficient.  It has the highest cost per kilowatt-hour generated (something like 30 times that of coal). 

Wind farms are another great idea.  Pull energy from the wind.  No muss, no fuss.  We’ll just ignore the fact that energy is only created when the wind blows (which is unpredictable).  We’ll also overlook how hard it is to manage wind power in the grid, and that we have no way to store the excess capacity at present.

Electric cars are a GREAT idea.   Clean, and fast.  They only cost anywhere from twice to three-times that of a normal car.  Their range is less than half that of a gasoline engine, and most of them can only carry two people.  Plus, they tend to take hours to charge.  But ignore those petty, minor details.

Let’s also gloss over the fact that our present electrical grid gets overloaded every summer when everyone turns on their air conditioning units all at once.

It isn’t the limitations of the technology that matters – it’s the promise they offer.  And if you throw lots of money at the problem, all those limitations go away, and everything costs less.  I mean, just look at the astounding successes in Medicare, Medicaid, and Social Security with this method!

Really – don’t most families have $50,000.00 to put down on an electric two-seater car?

All sarcasm aside, do you see the parallels?  Here we have a bunch of new technology – much of it way over-hyped – being “sold” to the American public as being better than what we had before.  The reality is that only a fraction of people can use it because of cost.  Many of these solutions are based on unproven technologies that will take years to further develop and refine.  Even with that, there is no guarantee that these will be the panacea that this nation is looking for.  In fact, stuff like electric cars and windmills have been around for a century or more.  They didn’t catch on for really good reasons in the past.

But, if we just throw enough money at it, we can tread water until the technology advances.  Is this sounding familiar now?

And who is pushing this stuff?  Well, mainly politicians, most of whom wouldn’t know the difference between a kilowatt hour and the measure of horsepower.  Does anyone seriously think that idiots like Obama, Arnold Schwarzenegger, and Jennifer Granholm know much of anything about things like battery capacity, and recharge times?  The only thing these people know is how to lie well enough to get re-elected.  Starting to sound like the cyber-chicks in the story I mentioned above?

Unrealistic expectations have already set in.  Now, as far as I can tell, it is only a matter of time before the “green” sectors blisters, bubbles, and then finally pops.  I think it’s fair to say that one should never underestimate the idiocy of stupid people who have a lot of money.  The beauty of America is that even some of the dumbest people can accumulate large sums of money if they work hard enough.  Just look at Ted Turner.  You also might want to ask Ted how he fared with his investment in AOL…

The difference this time, however, is that most of this is going to be funded with YOUR tax dollars, by people who were generally too stupid to get a real job in the private sector.

There were lessons to be learned from the Dot-Com bubble.  While the technology sector took a big hit, the promise of the technology was actually real.  Then again, the people pushing it were those looking at a way to either streamline costs, or as a means of revenue generation.  The Internet had a purpose.  So, when the bubble burst, the phonies were washed away, those left standing actually had functionality that measured up to their initial promise.  And, because most of this new technology was fairly unregulated, and capable of quick turnaround times, tools and products advanced at a rapid rate.  Software is fairly easy to produce, and fast to get to market when compared to hardware.  So, the turnaround after the bubble was only a matter of a few years.  It was slow, but steady growth.

Hardware is more costly to make, and slower to get to market.  Make no mistake, all of this green energy “promise” is based off hardware – no ifs, ands or buts about it.

However, the greatest lesson learned about economic bubbles both future in past, is one that is often overlooked.  Bubbles are not generated by the free market itself.  Bubbles require the assistance of the federal government and the socialists that infest it like parasites.  Look deep enough at the housing bubble, and you’ll see government pulling all the strings, and forcing banks to provide risky loans to disadvantaged people in order to get them in their own home.  This is nothing but good old-fashioned social engineering.

As for the Dot-Com bubble, one need only look at the enthusiasm of the Clinton / Gore team in promoting things like an Information Superhighway, and touting the “new economy” based on B2B enterprises that were mostly vaporware.  Bill Clinton was even arrogant enough to claim that they had co-opted the business cycle.  Such stupidity brought about the recession that Bush inherited in 2001.

And what do we have now?  Barack Obama and his socialist goons pushing “green” energy as a solution to all our energy problems.

The clock is ticking folks.

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