Archive for the ‘business’ Category
bonobos, religion and feminism
bonobos, promoting the common good
Yuval Noah Harari argues in Homo Deus that religion has lost, or is losing, its political clout, and is largely a force of the past with little impact on the future. This is largely true, but more so in WEIRD countries. Catholicism still has a firm grip on many South American and African countries, and I don’t see any Islamic nations Enlightenment in the offing – but you never know.
During the ‘New Atheism’ fervency of a decade and more ago, I became quite engaged in the issues. I’ve never believed in any gods, but I’d avoided really thinking about Christianity’s ascendancy in the UK and Australia (I have dual nationality). The decline of the religion even before New Atheism had made it all quite easy to ignore, but the new polemics excited me enough to read the new texts – The God Delusion, God is Not Great, Breaking the Spell and assorted others. Perhaps more importantly, I actually read the Bible, and, through my blog, wrote my own exegesis of the gospels and other New Testament writings, compared Jesus to Socrates, and other fun things. It passed the time. And I’m sure the movement hastened the drift away from religion in the WEIRD world.
For these essays, though, I’m thinking of how religions have impacted on the females of our species. Catholicism, Islam and Hinduism, in particular, have had a congealing affect on male and female social roles, especially, it seems, among the poorer classes in the cultures those religions dominate.
There’s a lot that I could say about religions, but in a nutshell they grew, initially, out of a desire to understand and control the world as humans saw it. That’s why, in my view, they’re in competition with science, which grew out of exactly the same desire, but which has turned out to be phenomenally more successful in fulfilling that desire. So religions are in wholesale retreat, especially in the WEIRD world.
Let me elaborate. The world to early human apes was full of mysteries, as it is to bonobos, chimps and other smart creatures, who might take note of such sights as waterfalls, volcanic eruptions, lightning fires, and even, perhaps, slow changes like the growth of a tree from a seedling. Also regular occurrences such as the change from day to night, seasons, the movements of the sun, moon and stars. But human apes would likely go further than a sense of wonder and awe. They would come to wonder what, and why. And lacking any handy explanations they would turn to inventing them – and those whose inventions seemed most convincing, and who seemed most familiar with the forces at play, either through delusion, calculation or conviction, might attain a power of sorts over the group, something seen as innate and special, and perhaps passed down to offspring. The forces and vagaries of wind and water, heat and cold, of food abundance and scarcity, might seem to be manipulable by the powers and spirit of these chosen few, the adumbrations of religious figures, shamans, a priestly caste. And given that, apart from a few notable exceptions – some ancient Greeks and the odd Egyptian and Chinese – science as we know it is a very recent phenomenon, religions held sway for ages, not only explaining and ‘controlling’ the powers of nature, but inventing plausible enough stories for how it all began and who to thank or blame for it all.
If this just-so story about the origins and purpose of religion has some truth to it, then it follows that religion has a conservative element. This is how the world began, these are the forces that created it, and this, that and this is what they want from us, in payment for the life they’ve given us. It’s unchanging, and we need to maintain our roles, eternally. For example, the Judea-Christian origin story has woman as almost an afterthought, man’s helpmeet, shaped from a supernumerary rib. The Islamic creation story is altogether more vague, but both myths took shape within highly patriarchal societies, and served to maintain those societies largely unchanged for centuries, until we began to find better explanations, at an accelerating rate.
Still, we’re left with the legacy of those religions and, for example, their views on leadership. It strikes me that some of the Catholic hierarchy would rather be burned at the stake than allow women to become priests, and I doubt that there are too many female Imams. There are debates of course, about whether restrictions on female leadership roles are cultural or religious, or indeed about whether culture and religion can be separated, but they often work together to maintain a perennial status quo.
Until, of course, they don’t. Modern science has knocked us off our pedestal as the darlings of the gods, and has reframed what used to be our whole world as a tiny planet revolving around a bog-standard star on the outskirts of a fairly nondescript spiral galaxy in one of possibly countless universes. It’s been a bit of a downward spiral for our sense of specialness, and it’s all been quite sudden. We can pat ourselves on the back, though, for having brought ourselves to our senses, and even for launching ourselves into the infinity of progress – a world of particle colliders, tokamaks, theory-of-mind-AI, quantum computers and space tourism and much else beyond the horizon. And yet, the old patriarchy is still largely with us. Men in suits, or in uniforms, leading the military, dominating the business world and manipulating the political arena. There’s no good reason for it – it’s simply tradition, going back to early culture and religion. Some of these cultures seem incorrigible in spite of their new-found WEIRDness. Will Japan, for example, ever transform its male business and political culture? When will we see another Chinese woman in the Politburo? As to Russia’s Putin and his strong man allies – when will this kindergarten club grow up?
With the success and growth of modern science has come great international, and inter-gender, collaboration. I can think of no greater model for our future development. With the current pandemic, too, we’ve seen follow-the-science politicians, many of them women, emerging with the greatest credit. Co-operation among women has always been powerful, but too little recognised. I would like to see more of this co-operation, especially in the service of keeping men in their place. It works for bonobos. I truly feel that a bonobo culture, but with human brainpower, would make the human world more exhilarating, in its compassion, in its sexiness, in its sense of connection with the biosphere and all its delicate mechanisms, than any other cultural change we can make. I actually think it will happen – though sadly not in my lifetime.
hedge funds, the stock market, and other unknowns
A GameStop shop in Florida – it’s a US thing, but with retailers in Australia
So there’s a big story in the USA to do with hedge funds, stocks and the little guys upsetting the big guys, finance-wise, or something like that. Time for a closer look, comme on dit (I know far more about French than finance).
Having been poor (in first-world terms) all my life – and work-shy, because I’m constitutionally anti-authoritarian, and when you’re a nobody and a know-nothing, you have to work for bosses – I’ve tried to salve my guilt for living mostly off the public purse by being a more or less prolific writer and reader. Of course I’ve had brief jobs – in factories, offices, restaurants, schools, a hospital and a farm – and I did eventually manage to get to university, again off the public purse, incurring a debt I’ll never be able to repay. So during this misfit life I’ve learned a lot, in a general way, about history, politics and the various sciences, but virtually nothing about finance, the province of the wealthy.
Some preliminary remarks. Most wealthy people, surely, come from wealth. They have wealthy parents, wealthy friends and associates. They get advice from those around them about increasing their wealth, minimising losses, investment, property and so forth. I’ve heard this kind of talk at restaurant tables and in wealthy homes where I did occasional gardening work. It was like listening to people speaking a foreign language, and as psychologists tell us, we feel anxious, and sometimes hostile, when we listen to a language we don’t understand. They even have a fancy name for it – xenoglossophobia.
The best way to overcome phobias, so I’m told, is to expose yourself, little, by little, to the fear-inducing thing. It’s never too late, so here goes.
What is a hedge fund? The ABC (Australia) business reporter David Chau tries to explain:
Essentially, it’s a fancy word for an “alternative” investment partnership that has the freedom to invest aggressively in a broad range of financial products. They’re actively managed, and more expensive to invest in, compared to other funds. Many of them use a “2 and 20” compensation structure. It means hedge fund managers are paid a 2 per cent commission (of the assets they’re managing), and 20 per cent of profits (above a certain benchmark) each year. Even if the fund manager does nothing (or worse, loses money on your investments), they’ll still get paid their 2 per cent. Their goal is to maximise investor returns, but only “sophisticated investors” can join. To qualify, you typically need to own about $2.5 million worth of net assets, or earn $250,000 per year in gross income (for the past two financial years). So a hedge fund’s clients tend to be rich people, or big institutional investors (like an insurance company or superannuation fund).
The idea, clearly, is to invest in a company that you think will do well in the future. Or one that you want to do well, because you think what it’s doing/manufacturing etc is positive for the community, or the world. I presume, for example, that Elon Musk’s fantastical personal wealth, which he derives from his companies, is a result of people investing in those companies because they believe in what he’s doing – though that may be a naïve view.
In any case, clearly, hedge funds are for the rich who hope to get richer. It’s like placing a bet (though presumably you can do this without joining a hedge fund), putting money into shares, calculating that you can make a profit by selling them later. This makes things a bit weird, though. You buy shares in a company because you believe it will do well, so then why would you want to sell those shares later? Presumably because you’ve lost faith in that company? Or is it just to make a profit, knowing that the shares you’re selling will be snapped up by others? But why not keep them, if the price is going up? But surely you have to sell at some time, to make a profit? To liquidate your assets?
Okay, more questions than answers. Short selling, or shorting, as David Chau and others explain it, involves somehow borrowing shares from the market and then selling them, believing or knowing that their value will tank. After it has tanked they buy the shares again and give them back to the market at their current reduced value, and pocket the difference. Which sounds like a very dodgy practice to me, an easy or lazy way of making money – looking for businesses that are failing, which given our rapidly changing economic and technological environment, wouldn’t be difficult to find, and cashing in on the misery of those businesses. So how is this allowed, and how can you get away with selling borrowed stock? How can it be your stock to sell? I’ve watched Sal Khan, who of course I hugely admire, talking about this, but his explanations about the possible benefits of shorting seem vague to me.
All of this attempt at understanding comes, of course, due to the ‘GameStop’ bubble which is bound to burst in the USA. Hedge funds and their rich customers have been shorting the stock of this gaming franchise called GameStop, as well as other brick-and-mortar companies that have been losing business, either due to the pandemic or to changing consumer practices. People on Reddit, a social website I’ve never used, have been doing the opposite, buying shares and doing everything to inflate the share price of these companies, and everyone’s awaiting the fallout, or the train-wreck as one pundit described it. These Reddit investors have been able to do this using an app called RobinHood, a name with obvious connotations. This has of course led to an outcry from the rich-getting-richer crowd, and the RobinHood CEO stepped in, banning the buying of these declining stocks, but not the selling. Which led to an outcry from the Reddit ‘rookie investor’ crowd, which led to RobinHood modifying its position and allowing some stock purchases. A number of financial pundits I’ve listened to, who seem largely sympathetic to the anti-hedge fund investors, are shaking their heads and predicting it will all end in tears, and not so much for the hedge fund zillionaires. Ain’t it always the way.
Meanwhile the the wealthy professional hedge fund types are decrying the behaviour on the Reddit subgroup WallStreetBets as ‘unsophisticated’, though it’s clearly because the newbies are, quite deliberately, upsetting the applecart of making a profit from business misery. Having said that, they’re clearly trying to cash in as well. So I really don’t know quite what to make of it all. Like just about everyone else.
Stop press (sort of): I’m not much of a gamer, so I didn’t have any idea whether GameStop had a presence here in Australia. Apparently, EB Games, which I’ve seen around, is our principal retailer for GameStop. This Crikey article, which clearly takes a much more negative line on hedge funds than Sal Kahn does, points out that EB games employs, or did before the pandemic, between 2000 and 4000 workers, and that they, like so many others, are impacted by hedge fund shorting. Here’s what the Crikey journalist, Christopher Warren, has to say:
Rather than leave matters to the actual marketplace of buyers and sellers, the masters of the universe in the financial markets decided to hurry on the collapse of retail by using “shorts”, borrowing shares to sell now, buy back (cheaper) later. The play has been hollowing out capitalism for 30-odd years in a five-step death spiral: manufactured share price collapse through shorting, which allows a cheap private equity buyout, who gut through sackings and closures, then relaunch or rebrand, before quietly closing. In journalism, movies and TV, the hedge funds are proudly the misunderstood anti-hero. Take the fictional Bobby Axelrod in Stan’s anchor program Billions: “We’re white blood cells scrubbing out bad companies, earning for our investors, preventing bubbles. A hedge fund like mine is a market regulator.” The reality is that hedge funds create no value. They’re money-sloshing machines that make money on turnover, not results. This means they’re incentivised to “do something” to maximise turnover, whether that’s moving the market through shorts, falsifying results (hello Bernie Madoff!) or offering, umm, alternative services like the late Jeffrey Epstein.
I’m inclined to take this line myself, but I’m not informed enough to be sure. And there are so many more interesting things to learn about than financial markets.
References
https://www.abc.net.au/news/2021-01-30/hedge-funds-the-gamestop-bubble-and-wall-street/13104846
Mehdi Hasan Gets a Personal Khan Academy Lesson on the GameStop Stock Squeeze | The Mehdi Hasan Show (video)
GameStop Surge Shows Power Shift On Wall Street | Stephanie Ruhle | MSNBC (video)
situation USA 2 – very likely, the worst is yet to come
The USA, over the past two and a half years, has been the object of a global ridicule and opprobrium never experienced before in its history, and it’s largely deserved. And the reason lies in a flaw in democracy pointed out by Greek philosophers, unabashed anti-democratic elitists, some 2500 years ago. Their concern was that the people could be too easily swayed by populist demagogues, individuals who, either through self-delusion or basic deceit, promised everything and delivered nothing, or worse.
There’s a famous quote, attributed to Churchill, that democracy ‘is the worst system of government, apart from all the others’. That description should be taken seriously. There’s no perfect system of government, in fact far from it. And democracy, in its purest form, is never practised anywhere. I’ve heard it said that a free press and an independent judiciary are two of the ‘pillars of democracy’. This is false. They’re in fact bulwarks against democracy. Both of these institutions are elite meritocracies. Another essential bulwark against democracy is an independent science and technology sector. If we based our acceptance of science on popular vote, we’d almost certainly still be living in caves, subsisting on the most basic requirements for survival. So let’s not worship democracy, but nor should we throw it out with the bathwater.
Democracy’s biggest saving grace is that it is inclusive. Everybody gets to have a say. One possible vote for each adult – assuming there’s no corruption of the process. In this respect, if nothing else, everybody is equal. Yet we know that no two people reflect in an ‘equal’ way, whatever that means, before casting their vote. Some are massively invested in voting, others barely at all, and their investments go in innumerable directions. Some of those directions never change, others zig-zag all over the place. And history shows, as the Greek philosophers knew well, that a licence to vote doesn’t turn anyone into a discerning voter.
The USA, it seems to me, suffers from two problems – too much democracy on the one hand, and too great a concentration of power on the other. They say that in the USA, anyone can become President. This is something Americans like to brag about. It’s not true of course, but even if it were, it wouldn’t be a positive. There appears to be no screening for such candidature. Some Americans are calling for extreme vetting of immigrants, but nobody appears to be calling for the same for Presidential candidates. You might argue that the same goes under the Westminster system of democracy, but in fact there is such a system, albeit informal, for attaining the position of Prime Minister. She must first gain the approval of her party, her team (and she can be dumped by that team at any time). In the 2016 US election, the candidate Trump by-passed the party he claimed to be a member of, and appealed entirely to the people, with a wide range of vague promises and claims about his own brilliance and effectiveness. The business cognoscenti knew well enough that Trump was a buffoon, a blowhard and a flim-flam man, but they also knew that his presidency, in being good for his own business, would be good for other businesses too, especially in the field of taxation. The Republican Party as a whole – with a number of notable exceptions – fell in line. Those who believed in minimal government recognised that Trump’s noisy incompetence would actually bring about minimal government by default, and give the governmental process a bad name, which was all fine by them. The question of ethics rarely entered into it.
As a distant watcher of what I’ve called the slow-motion train wreck of the Trump presidency, I’ve learned more than I ever thought I would know about the US presidential system, and more than I ever wanted to know about Trump himself.
For some time, Trump was nothing more than a funny name to me. My first full-on experience of him must have come from an early showing of ‘The Apprentice’, probably accidentally stumbled on through channel-hopping. I’ve never taken much interest in the business world, mea culpa. Within literally seconds, I was thinking ‘If I didn’t know better, I’d assume this was a black comedy. The host talks total gobshite, and the contestants, all actors, treat him like a deity. His very name is meant as a joke – he trumps everyone else in spite of being tasteless, boorish and pig-ignorant – and the contestants, who are put up in a monument to vulgarity called ‘Trump Tower’, swoon at all the gimcrack opulence. No better caricature of the Ugly American has ever been created’. Yet I knew that this was no caricature. Or rather, Trump was a caricature, but also a real human being.
What I didn’t know then, and what I’ve learned since his accession to the presidency, was the extent of Trump’s criminality. This has been fully revealed through a couple of New York Times stories, but I first learned about it through Sam Harris podcasts and other outlets, as well as through the words and behaviour of Trump himself, and his thuggish cronies. His use of standover men, fixers and the like has all the markings of organised crime – or somewhat disorganised crime in Trump’s case. The fact that he has gotten away with this behaviour for decades is a testament to the problems of the US justice system.
Trump became President with a minority of votes – this time revealing a problem with the federal electoral system. Claims by pundits such as Niall Ferguson that Putin’s interference in that election had a minimal effect were either naive or politically motivated. The Putin dictatorship’s actions were sophisticated and brilliantly targeted, and the subsequent response of Trump to the clear evidence of that interference should have been enough to have him thrown out of office. Another massive problem with the US federal system.
Sensible Americans are now faced with the problem of getting rid of Trump, and engaging in the root and branch reform of the disastrous system that allowed Trump’s rise to and maintenance of power. It seems, from other pundits I’ve read, that the US Presidency has experienced a kind of ‘dictatorship creep’ over the years, and this now needs to be confronted directly. The judiciary, for example needs to be fully independent, with the highest positions decided upon by judicial peers. Presidential emoluments need to be eliminated through clear, solid law. Presidential pardoning powers need to be sharply restricted, or preferably removed from the President altogether and placed in the hands of senior law officials. The presentation of all available taxation documents must be a sine qua non of presidential candidacy. If Presidents are to be directly elected – not a great idea IMHO – it should be through a first-past-the-post, one-vote-one-value system. Presidential immunity must be jettisoned, and if this interferes with the President’s role, this should scream to the American people that the President’s role is too burdensome, and that governmental power needs to be less concentrated and more distributed.
All of the preceding, and more, seems obvious to an outsider, but among Americans, brought up since infancy to believe they have the best government in the multiverse, self-criticism in this area is hard to come by. Possibly more abuse of the system by Trump and his enablers will wake Americans up to what’s needed, but I remain skeptical.
Which brings us back to the immediate situation. I have to admit, what has surprised me more than anything about this presidency is that Trump’s following hasn’t been reduced substantially since falling to around the 40% mark very early in his term. Clearly, his base, much-despised by Trump himself, has gained nothing from his incumbency, as opposed to the super-rich (small in number but gargantuan in power), who see through Trump but cynically support his lazy, neglectful attitude to government administration. The fact that this base is solid and easily aroused reveals a long-standing problem in America’s individualistic, mistrustful, and massively divided society. Trump is wily enough to try to take advantage of this discontent, especially as the law appears to be closing in on him. He may not have the numbers to win another election, but he is very likely to use those numbers to do as much damage to America’s much-vaunted but clearly very fragile separation of powers as he possibly can. I’m unfortunately quite convinced that the worst of the Trump presidency is yet to come.
an assortment of new technology palaver
I like the inset pic – very useful for the Chinese
Western Australia lithium mining boom
I’m hearing, better late than never, that lithium carbonate from Western Australia is in big demand. The state already provides most of the world’s lithium for all those batteries used to run smart devices, electric vehicles, and large-scale storage batteries such as South Australia’s Tesla-Neoen thingy at Jamestown (now 80% complete, apparently). Emissions legislation around the world will only add to the demand, with the French and British governments planning to ban the sale of petrol and diesel vehicles by 2040, following similar plans by India and Norway, and the major investments in EVs in China. Australia’s government, of course, is at the other end of the spectrum re EVs, but I’ve no doubt we’ll get there eventually (we’ll have to!). Tesla, Volvo, Nissan, Renault, Volkswagen and Mercedes are all pushing more EVs into the marketplace. So now’s the time, according to Money Boffins Inc, to buy shares in lithium and other battery minerals (I’ve never bought a share in my life). This lithium mining boom has been quite sudden and surprising to many pundits. In January of this year, only one WA mine was producing lithium, but by mid-2018 there will be eight, according to this article. The battery explosion, so to speak, is bringing increased demand for other minerals too, including cobalt, nickel, vanadium and graphite. Australia’s well-positioned to take advantage. Having said that, the amount of lithium we’re talking about is a tiny fraction of what WA exports in iron ore annually, but it’s already proving to be a big boost to the WA economy, and a big provider of jobs.
battery recycling
Of course all of this also poses a problem, as mentioned in my last post, and it’s a problem that the renewable energy sector should be at least ideologically driven to deal with: waste and recycling. Considering the increasing importance of battery technology in our world, and considering the many toxic components of modern batteries, such as nickel, lead acid, cadmium and mercury, it’s yet another disappointment that there’s no national recycling scheme for non-rechargeable batteries. Currently only lead acid batteries can be recycled, and the rest usually end up in landfill or are sent to be recycled overseas. So it’s been left to the industry to develop an Australian Battery Recycling Initiative (ABRI), which has an interesting website where you can learn about global recycling and many other things batterial – including, of course, how to recycle your batteries. Also, an organisation called Clean Up Australia has a useful battery recycling factsheet, which, for my own educational purposes I’m going to recycle here, at least partly. Battery types can be divided into primary, or single-use, and secondary, or rechargeable. The primary batteries generally use zinc and manganese in converting chemical to electrical energy. Rechargeable batteries use a variety of materials, including nickel cadmium, nickel metal hydride and of course lithium ion chemistry. Batteries in general are the most hazardous of waste materials, but there are also environmental impacts from battery production (mining mostly) and distribution (transport and packaging). As mentioned, Australian batteries are sent overseas for recycling – ABRI and other groups are trying to set up local recycling facilities. Currently a whopping 97% of these totally recyclable battery units end up in landfill, and – another depressing factoid – Australia’s e-waste is growing at 3 times the rate of general household waste. So the public is advised to use rechargeable batteries wherever possible, and to take their spent batteries to a proper recycling service (a list is given on the fact sheet). The ABRI website provides a more comprehensive list of drop-of services.
2015 registrations: Australia’s bar would be barely visible on this chart
EVs in Australia – a very long way to go
I recently gave a very brief overview of the depressing electric vehicle situation in Australia. Thinking of buying one? Good luck with that. However, almost all motorists are much richer than I am, so there’s hope for them. They’re Australia’s early adopters of course, so they need all the encouragement we can give them. Journalist Timna Jacks has written an article for the Sydney Morning Herald recently, trying to explain why electric vehicles have hit a dead end in Australia. High import duties, a luxury car tax and a lack of subsidies and infrastructure for electric vehicles aren’t exactly helping the situation. The world’s most popular electric car, the Nissan Leaf, is much more expensive here than in Europe or the US. And so on. So it’s hardly surprising that only 0.1% of all cars sold in Australia in 2015 were electric cars (compared with 23% and rising in EV heaven, aka Norway, 1.4% in France and 0.7% in the US). Of course Australia’s landscape’s more or less the opposite of compact, dense and highly urbanised Europe, and range anxiety might be a perennial excuse here. We have such a long way to go. I expect we’ll have to wait until shame at being the world’s laughing-stock is enough of a motivation.
Adelaide’s Tindo
I’ve been vaguely aware of Adelaide’s ‘green bus’ for some years but, mea culpa, haven’t informed myself in any depth up until now. The bus is called Tindo, which is a Kaurna aboriginal word meaning the sun. Apparently it’s the world’s first and only completely solar powered electric bus, which is quite amazing. The bus has no solar panels itself, but is charged from the solar panels at the Franklin Street bus station in the city centre. It’s been running for over four years now and I’m planning to take a trip on it in the very near future. I was going to say that it’ll be the first time I’ve been on a completely electric vehicle with no internal combustion engine but I was forgetting that I take tram trips almost every day. Silly me. Still, to take a trip on a bus with no noisy engine and no exhaust fumes will be a bit of a thrill for me. Presumably there will be no gear system either, and of course it’ll have regenerative braking – I’m still getting my head around this stuff – so the ride will be much less jerky than usual.
So here are some of the ‘specs’ I’ve learned about Tindo. It has a range of over 200 kilometres (and presumably this is assisted by the fact that its route is fixed and totally urban, so the regen braking system will be charging it up regularly). It uses 11 Swiss-made Zebra battery modules which are based on sodium nickel chloride, a type of molten salt technology. They have higher energy density, they’re lightweight and virtually maintenance free. According to the City of Adelaide website the solar PV system on the roof of the bus station is (or was – the website is annoyingly undated) ‘Adelaide’s largest grid-connected system, generating almost 70,000 kWh of electricity a year’. No connection to the ‘carbon-intensive South Australian electricity grid’ is another plus, though to be fair our grid is far less carbon intensive than Victoria’s which is almost all brown coal. South Australia’s grid runs on around half gas and half renewables, mostly wind. The regen braking, I must remind myself, means that when decelerating the bus uses no energy at all, and the motor electronically converts into an electrical generator, which generates electricity with the continued forward motion of the bus. There are many more specs and other bits of info on this Tindo factsheet.
What’s Weatherill’s plan for South Australia, and why do we have the highest power prices in the world? Oh, and I should mention Elon Musk here – might get me more hits
just a superhero pic to rope people in
I’ve written a few pieces on our electricity system here in SA, but I don’t really feel any wiser about it. Still, I’ll keep having a go.
We’ve become briefly famous because billionaire geek hero Elon Musk has promised to build a ginormous battery here. After we had our major blackout last September (for which we were again briefly famous), Musk tweeted or otherwise communicated that his Tesla company might be able to solve SA’s power problems. This brought on a few local geek-gasms, but we quickly forgot (or I did), not realising that our good government was working quietly behind the scenes to get Musk to commit to something real. In March this year, Musk was asked to submit a tender for the 100MW capacity battery, which is expected to be operational by the summer. He has recently won the tender, and has committed to constructing the battery in 100 days, at a cost of $50 million. If he’s unsuccessful within the time limit, we’ll get it for free.
There are many many South Australians who are very skeptical of this project, and the federal government is saying that the comparatively small capacity of the battery system will have minimal impact on the state’s ‘self-imposed’ problems. And yet – I’d be the first to say that I’m quite illiterate about this stuff, but if SA Premier Jay Weatherill’s claim is true that ‘battery storage is the future of our national energy market’, and if Musk’s company can build this facility quickly, then it’s surely possible that many batteries could be built like the one envisaged by Musk, each one bigger and cheaper than the last. Or have I just entered cloud cuckoo land? Isn’t that how technology tends to work?
In any case, the battery storage facility is designed to bring greater stability to the state’s power network, not to replace the system, so the comparisons made by Federal Energy Minister Josh Frydenberg are misleading, probably deliberately so. Frydenberg well knows, for example, that SA’s government has been working on other solutions too, effectively seeking to becoming independent of the eastern states in respect of its power system. In March, at the same time as he presented plans for Australia’s largest battery, Weatherill announced that a taxpayer-funded 250MW gas-fired power plant would be built. More recently, AGL, the State’s largest power producer and retailer, has announced plans to build a 210MW gas-fired generator on Torrens Island, upgrading its already-existing system. AGL’s plan is to use reciprocating engines, which executive general manager Doug Jackson has identified as best suited to the SA market because of their ‘flexible efficient and cost-effective synchronous generation capability’. I heartily agree. It’s noteworthy that the AGL plan was co-presented by its managing director Andy Vesey and the SA Premier. They were at pains to point out that the government plans and the AGL plan were not in competition. So it does seem that the state government has made significant strides in ensuring our energy security, in spite of much carping from the Feds as well as local critics – check out some of the very nasty naysaying in the comments section of local journalist Nick Harmsen’s articles on the subject (much of it about the use of lithium ion batteries, which I might blog about later).
It’s also interesting that Harmsen himself, in an article written four months ago, cast serious doubt on the Tesla project going ahead, because, as far as he knew, tenders were already closed on the battery storage or ‘dispatchable renewables’ plan, and there were already a number of viable options on the table. So either the Tesla offer, when it came (and maybe it got in under the deadline unbeknown to Harmsen), was way more impressive than others, or the Tesla-Musk brand has bedazzled Weatherill and his cronies. It’s probably a combo of the two. Whatever, this news is something of a blow to local rivals. What is fascinating, though is how much energetic rivalry, or competition, there actually is in the storage and dispatchables field, in spite of the general negativity of the Federal government. It seems our centrist PM Malcolm Turnbull is at odds with his own government about this.
So enough about the Tesla-Neoen deal, and associated issues, which are mounting too fast for me to keep up with right now. I want to focus on pricing for the rest of this piece, because I have no understanding of why SA is now paying the world’s highest domestic electricity prices, as the media keeps telling us.
According to this Sydney Morning Herald article from nearly two years ago, which of course I can’t vouch for, Australia’s electricity bills are made up of three components: wholesale and retail prices, based on supply and demand (39% of cost); the cost of poles and wires (53%); and the cost of environmental policies (8%). The trio can be simplified as market, network and environmental costs. Market and network costs vary from state to state. The biggest cost, the poles and wires, is borne by all Australian consumers (at least all on the grid), as a result of a massive $45 billion upgrade between 2009 and 2014, due to expectations of a continuing rise in demand. Instead there’s been a fall, partly due to domestic solar but in large measure because of much tighter and more environmental building standards nationwide as part of the building boom. The SMH article concludes, a little unexpectedly, that the continuing rise in prices can only be due to retail price hikes, at least in the eastern states, because supply is steady and network costs, though high, are also steady.
A more recent article (December 2016) argues that a rising wholesale price, due to the closure of coal-fired power stations in SA and Victoria and higher gas prices, is largely responsible. Retail prices are higher now than when the carbon tax was in place in 2013.
This even recenter article from late March announces an inquiry by the Australian Competition and Consumer Commission (ACCC) into retail pricing of electricity, which unfortunately won’t be completed till June 30 2018, given its comprehensive nature. It also contains this telling titbit:
A report from the Grattan Institute released earlier in March found a decade of competition in the market had failed to deliver better deals for customers, with profit margins on electricity bills much higher than for many other industries.
However, another article published in March, and focusing on SA’s power prices in particular (it’s written by former SA essential services commissioner Richard Blandy), takes an opposing view:
Retailing costs are unlikely to be a source of rapidly rising electricity prices because they represent a small proportion of final prices to consumers and there is a high level of competition in this part of the electricity supply chain. Energy Watch shows that there are seven electricity retailers selling electricity to small businesses, and 12 electricity retailers selling electricity to households. Therefore, price rises at the retail level are likely to be cost-based.
Blandy’s article, which looks at transmission and distribution pricing, load shedding and the very complex issue of wholesale pricing and the National Energy Market (NEM), needs at least another blog post to do justice to. I’m thinking that I’ll have to read and write a lot more to make sense of it all.
Finally, the most recentest article of only a couple of weeks ago quotes Bruce Mountain, director of Carbon and Energy Markets, as saying that it’s not about renewables (SA isn’t much above the other states re pricing), it’s about weak government control over retailers (could there be collusion?). Meanwhile, politicians obfuscate, argue and try to score points about a costly energy system that’s failing Australian consumers.
Infographic from theconversation.com http://theconversation.com/south-australias-electricity-price-woes-are-more-due-to-gas-than-wind-62824
I’ll be concentrating a lot on this multifaceted topic – energy sources, storage, batteries, pricing, markets, investment and the like, in the near future. It exercises me and I want to educate myself further about it. Next, I’ll make an effort to find out more about, and analyse, the South Australian government’s six-point plan for our energy future.
References and more reading for masochists
http://www.smh.com.au/business/sunday-explainer-why-is-electricity-so-expensive-20150925-gjvdrj.html
Is Donald Trump a great businessman?
another failed venture and a probable scam
Today I listened to a ‘news report’ delivered in front of our small class by a teenage student from China, a sweet young lad, near 7 feet tall and skinny as a bean, with limited English, whom I’ve been coaching in grammar. Students are asked to choose from a list of articles, simplified, in our class’s case, to pre-intermediate or elementary English level, and report on the article in their own words. My student had chosen the topic ‘Why Hilary Clinton lost the election’, a simplified version of an article by Dan Roberts, originally published in The Guardian on 9 November 2016, the day after Trump’s victory. Before he delivered his report, he had to check it through with me, a routine procedure, but to my annoyance he didn’t have any plan or notes to show me, and assured me that ‘it was all in his head’. He also asked me if it was alright if he focused more on Trump than on Hilary. I told him it was best not to divagate too much from the article, but he was free to voice his own opinion of the candidates.
It wasn’t a great talk. My student was, of course, very nervous, and he glossed over Roberts’ view that Clinton lost the election due to the economy, lack of trust and the weakness of her message. His main point was that Trump won because he was a successful businessman, and running a nation is all about money and success. This was really the totality of his talk, delivered in a halting, repetitive way.
Naturally I was irritated at this, but I let it slide. This was a test of English and not so much a test of critical thinking and analysis, though that had to be a factor. So, the fact that my student didn’t provide any evidence of Trump’s great business acumen certainly was a problem for his talk, which was clearly tendentious. However, considering that this was a low-level class I was prepared to give him a bare pass, and to quash my feelings over this oft-repeated claim that Trump has great business smarts.
From other sources I’ve heard very different claims. Sam Harris, in his Waking Up podcast, regularly asserts his view that virtually nobody is more unfit for the office he currently holds than Trump – the ‘boy-king’, as he calls him. In a recent interview with David Frum, Trump’s business skills were ridiculed. First, Frum took aim at Trump’s foreign policy approach, which was to see other parts of the world, such as the EU, as essentially business competitors, or people you should try to ‘cut deals with’, obviously to the advantage of the US. The fact that he was often dealing with allies who shared the values of the US seemed irrelevant. Then Frum mocked Trump’s reputation as a business operator, pointing out that in Toronto, where Frum, a Canadian-American, is involved in business, namely real estate, which of course is Trump’s business field, Trump’s reputation is somewhere between mud (to people he owes money to) and a laughing-stock (to interested spectators). He went on to say that ‘No-one in the business world has any respect for him as a businessman’.
Business and economics are not exactly my strong suits, but it seems to me that Frum, a lifelong Republican with inside knowledge of the real estate business, is a reliable witness here. However, I don’t want to take on face value his claim that nobody in the business world respects him. I need more evidence.
Before I go on though, I should make the point that Trump has, of course, already shown himself to be unfit for office regardless of his business activities. His bullying tactics as a candidate, the profound narcissism in so many of his utterances, his inflammatory and stupid remarks about those who live south of the US border, his ‘moslem ban’, his treatment of the free press, his admiration for the Russian mafioso dictator above all other world leaders, his scientific illiteracy, his pathetic and disgusting attacks on women’s appearance, his attacks on the judiciary, his contempt for his own intelligence agencies, and so much more, prove him to be a disaster for democracy and proper governance, and the shame for his election lies squarely with those who voted for him, knowing, as any intelligent person would know, the kind of person they were backing.
So to the business. A brief dummies’ guide to Trump’s ventures is given here, and it shows that his failures outnumber his successes, which presumably doesn’t prove him a failure, just as one or two movie successes can recoup twenty movie losses. As to his actual value, it’s pretty well the length of a piece of string, and it’s unclear if he’s made any money at all from the wealth he inherited. And it’s also very unclear how much money he actually inherited. Trump himself said during the campaign that he started off with $1 million and built a company worth more than $10 billion, a remark he prefaced with ‘believe me’.
Funnily enough, nobody does.
Trump received a share of his father’s estate at his death in 1999, and though there’s no clear figure, it was a lot more than $1 million. More importantly, his father set him up financially long before that. Donald Trump became President of Trump senior’s real estate business in 1974, at which time it was valued at $200 million, according to one estimate. But who knows? Here’s an interesting commentary from a Quora finance expert, Will Wister:
The growth of his wealth since 1982 has been in line with that of the S&P 500, according to his own statements. Donald Trump’s self-described net worth was $200 million in 1982. If he invested that money in the S&P 500, he’d be worth about $8.3 billion today. Today he claims his net worth is $8.7 billion. So based on his own claims, he has barely outperformed the S&P since 1982.
Some articles claim that Donald Trump’s inheritance was somewhere between 40 and 200 million in 1974. Since 1974, the S&P 500 is up about 74-fold. So his current claimed net worth of 8.7 billion would equate to about 120 million in 1974, which is right in the middle of estimates of what he inherited. In other words, if the articles are accurate, his performance was very close to that of the market from 1974 to present.
What this tells me, above everything else, is how the world is geared to the massive advantage of the super-rich (if you inherited millions in the seventies, you’d have to be disastrously stupid or dysfunctional to be a failure today), but it’s totally speculative about the boy-king’s wealth.
You would think that the public have a right to know more about this subject, considering that Trump parades his success as a businessman, and has used the claim as evidence of his ability to be the bestest of Presidents. Yet Trump has managed to evade the call to present his tax returns to the public, rejecting a 40-year tradition, and why would a successful businessman do that?
This matter of his tax returns and the state of his wealth takes on added importance in consideration of Trump and his family’s seemingly murky relations with Russia’s kleptocracy. Considering the bumbling way that Trump is dealing with the US presidency, it’s virtually impossible to imagine him as anything other than a bumbling businessman. Loud, histrionic, bragging and bullying certainly, but also bumbling and quite likely manipulable, given his infantile narcissism. This makes it more urgent than ever to uncover whether or not he’s indebted to Putin and his billionaire henchmen, who, I have no doubt, are far smarter and more cynical than he is. There’s an Emoluments Clause in the US constitution which states that:
no Person holding any Office…shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.
The legal question then becomes – do any Russian bail-outs for Trump’s incompetent business dealings constitute such emoluments? This would result in endless legal argy-bargy. Presumably Trump could squirm out of it if it was shown that, if there were any bail-outs, they occurred before he became President. But anyway it’s unlikely that he would willingly provide any information whatsoever about his financial dealings – which, given his well-known association with Russian political and financial figures, and given the well-established fact that Russia sought to undermine the democratic process in the recent election, and given the fact of Trump’s fawning admiration for the Russian dictator, whom he clearly admires above all other political leaders, should surely be sufficient reason, not for impeachment, but for removal from office. The Emoluments Clause, which in any cause wasn’t originally intended to be interpreted broadly, shouldn’t be given as the reason, it should be based on more serious matters. I’m not one to argue for treason, given my stance as an international humanist, but clearly Trump has betrayed democracy, the open society and the rule of law with his evasions and allegiances.
So far it looks like Trump is the kind of businessman you’d expect him to be given his performance as President, and given the character he displays. His ties to Russia are legion, and appear to be financially substantial, given that his many bankruptcies have exhausted the patience of US moneylenders. His business bragaddocio may fool the odd naive Chinese teenager, but the American public should have known better.
Incidentally, it seems the best business decision Trump has ever made was to run for President. The huckster’s chuckling now. Talk about playing the American public for suckers.
http://www.internationalbusinessguide.org/trump-business-career/
http://time.com/4433880/donald-trump-ties-to-russia/
http://www.politifact.com/florida/article/2016/mar/07/did-donald-trump-inherit-100-million/
https://www.businessinsider.com.au/trump-financial-disclosure-report-2017-6?r=US&IR=T