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The Cringely Plan: See the Light

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By Robert X. Cringely
bob@cringely.com

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In the early 1980s I was a volunteer firefighter for a tiny community in the Santa Cruz Mountains of Northern California. We all lived in a beautiful redwood forest and our task was to keep that forest from burning down in a huge conflagration, taking us all with it. The job was made all the harder because our little part of paradise hadn't burned since the 1920s, so there was 60+ years of flammable undergrowth just waiting to light off. The current financial crisis facing the United States and the world really isn't much different from that.

An unmanaged forest, one without the sort of fire control we attempted to provide, would naturally burn every few years. The undergrowth would build up, reach a critical mass, some source of ignition would come along -- usually lightning -- and all that undergrowth would burn. The redwoods themselves would be scarred but not really threatened, as we could see from the charring that marked them from countless such fires over centuries. Of course burning undergrowth threatened homes and property, too, so there was a natural desire on the part of that community to want the next burn to not come this year, please not this year. So there came a policy of aggressively fighting fires with the result that we eventually faced 60 (now 90!) years of flammable material growth rather than six or eight years. And the probable fire fueled by 60 years of undergrowth would have been so bad that our job changed to one of trying to prevent fires from happening, well, ever. This was an impossible task, of course. Eventually the stars would align the wrong way and the whole place would burn down, we all knew it. Just let it not happen on our watch.

Does this sound familiar?

Now America and much of the world face the possibility of recession and we handle that by first arguing about the definition of the term. Are we or are we not in recession? This distinction appears to be very important to some who view it like a forest fire: is it burning or not? Implicit in this distinction, I suppose, is the idea that if we're not burning -- if we are not in recession -- that maybe through some miracle we'll never face that problem. Whether this is a practical attitude or not depends entirely on your event horizon -- how soon you expect things to change.

The people in power in this country have a relatively short event horizon. Politicians tend to think of two, four, or eight years as the longest periods of time that matter. Corporate honchos might look out further, you could guess, but they don't since the average duration for a U.S. Fortune 500 CEO is under four years. So while the intent of the fire chief and the mayor and the governor and the Congressman and the President and the CEO is that there be no unpleasant surprises during their watch, all of them know such surprises are coming.

This short-term focus in the face of long-term difficulties leads to odd behavior at times. In the forest it is usually better to let smaller fires burn or even to deliberately set them, yet few fire chiefs are willing to take that risk, even though NOT taking the risk is so much worse. In financial markets, as companies crumble and governments prepare bailouts, short sellers pile on in scrums of doom that make the shorts rich yet hurt society. Traders with a trading mentality, they can't help themselves any more than Ralph Nader can keep from running for President. "But George Soros did it to the Bank of England," they say, as if that makes everything okay.

The American economy is at the end of its longest-ever period without a recession. Through sleight of hand and a fair amount of financial fraud we've managed to keep the "R" word out of our communal vocabulary for 14+ years. We did this through a succession of bubbles -- first the Internet bubble and then the real estate bubble with a little war bubble thrown in between. Financial bubbles are unnatural enough in themselves, but piling bubble atop bubble defies logic, yet still we managed to make it happen, helped somewhat by half a trillion dollars in war spending, all with borrowed money.

By rights the end of the Internet bubble should have sent us into recession, burning the financial undergrowth and setting up the next period of prosperity. But we avoided that and the result is what we see now -- something far worse.

Recession is inevitable at this point, yet still we talk about avoiding it. This is crazy talk. If we as an economy somehow push the next recession back a few more years, it will be all the worse when it comes. AND IT WILL COME. Everybody in power knows this; none of them argue against it; they all know recession is inevitable; they know that forestalling a recession at this point will only make it worse. Yet still they pray, "Not on our watch, please."

So we plan $700 billion bailouts on top of hundreds of billions in other knee-jerk measures all intended simply to forestall the inevitable and therefore ultimately bound to fail. "Just not on our watch, please."

The cost of delaying the inevitable is high, but we won't pay it, our children and grandchildren will. We can argue policy all day and whether this matters or not, but it is hard to argue that any such cost doesn't matter IF IT DOESN'T WORK.

So I propose The Cringely Plan -- a relatively small attempt to point public policy in a direction that makes sense for a change. The Cringely Plan won't avoid a recession because that's impossible. The Cringely Plan is intended, rather, to look beyond the inevitable recession and assist with the ultimate recovery and beyond.

What we need are energy and economic policies that play to the strengths of government, not its weaknesses. Governments are good at big moves that force changes of direction, not little moves intended to, for example, create the economic "soft landing" we'll start to hear about in a couple months.

Governments are best at turning super tankers, not at docking them.

And while governments can print money and thereby pay for a lot of stuff, they are actually most effective just telling us what we can or can't do, more than anything else. We can see that, for example, in the Clean Air and Clean Water Acts of the 1960s that significantly improved the lives of all Americans without the government having to pay for it.

The Cringely Plan does nothing for banks or mortgages. That's a problem that will have to work itself out, I think, and will if we give it a chance to do so. But we won't give it such a chance, I'm guessing, because it is an election year and because government is viewed as stupid and able to be threatened into paying for the most amazing things that it shouldn't. So The Cringely Plan has to look past banks and mortgages to energy policy and economic stimulus.

It would be interesting to know what the mortgage market would be like had the price of a barrel of oil not hit $140+. There still would have been a mortgage bubble bursting, but I wonder when?

Whatever the banking situation, though, we still need an energy policy and simply have not had one for decades. So get ready, here it comes; The Cringely Plan calls for:

Prohibiting the manufacture and sale of incandescent lights.

Kind of a letdown, eh?

That's it. No ethanol subsidies, no drilling in wilderness preserves, no tax credits, no artificial price supports, no enriching good ol' boys from the oil patch. And no cost to government at all.

As our incandescent lights wear out we'll have to replace them with something else, primarily compact fluorescents and LEDs.

Yes, this will lead to the closure of light bulb and filament plants in Ohio and elsewhere, costing a few thousand jobs. At the same time it will create jobs in the non-incandescent light industries as those ramp up. But most importantly, it will within a year (based on a 700-hour life for incandescent bulbs) lead to an 18 percent drop in U.S. electrical demand.

Dropping electricity demand by 18 percent will have an interesting effect on the electric utility industry. A simplistic view would suggest that our electric bills should drop by 18 percent. Cynics will point out that fixed overhead built into the regulated industry will keep bills from dropping that much simply because doing so would unduly hurt utility profits.

I don't think so.

Our utility bills pay for power that comes from many sources, some more efficient or profitable than others. Our bills also pay for building new power plants, some of which are again more efficient or profitable than others. An 18 percent cut in demand will have a huge impact on the production strategies and capital spending plans of every U.S. utility. More expensive plants built to serve marginal demand -- plants like smaller gas turbines for example -- could be taken off-line, dropping the average cost per kilowatt. Large new plants that have been in the works (and that we've been paying for) for years can be eliminated or delayed. Cancelled plants would lead to higher profits that lead to lower electrical rates. So our electric bill won't go down 18 percent, they'll go down 25 percent, which is a savings of $22 per month for the average American home.

Twenty-two dollars per month!? Big deal. Was there an economic component of this energy policy?

Well, it's a savings of $29 billion per year EVERY YEAR FROM NOW ON, which pales the recent and easily forgotten economic stimulus package that sent $600 checks generally not to the people who needed them most. How much of a positive effect those checks had on the economy is open to debate, but how much effect they had on reducing energy consumption isn't, because that effect was nada, zilch, zero.

$29 billion also amounts to about the annual debt service cost of either the Iraq war or the coming $700 billion bailout. Take your pick.

Want another energy policy with positive economic implications? Make single-phase lighting illegal for businesses with ceiling heights above 15 feet. Three-phase power at 380 or 440 volts is more efficient, requires less copper, and saves money overall. Once you have it in place for lighting it's a no-brainer to also use it for electric motors, where the savings are HUGE. The financial payback period for such conversion is under two years, which is an imputed annual interest rate of 50 percent. What investment can you reliably make that pays back 50 percent year after year after year?

Still no government money has been spent.

Take this a step further and require all new residential construction to use 380V three-phase power for EVERYTHING, which is to say turn the U.S. into Europe, where homes already use less power for the same level of service because of three-phase efficiency. Now this is a big change, of course, because it means getting all new electric appliances, TVs, everything. What's wrong with that? It's not like the products don't exist, since the same manufacturers are already making them for sale in Europe. Market expansion leads to lower prices. Swapping out 10 percent of the U.S. appliance market per year ON TOP OF NORMAL ATTRITION would create a huge boom in electronics and electrical goods. Okay, maybe this one will cost some money, but no more than those $40 digital decoder subsidies the government is already handing out.

These are just a few examples of what can thoughtfully be accomplished. There's a natural role for government here and that's setting rules. They are good at that. Government hasn't always been as good at enforcing rules as setting them, but that doesn't mean rules aren't worth having. Let's just set a few new ones that make sense as we recover and rebuild after the economic fire to come.

Comments from the Tribe

Status: [OPEN] read all comments (5) | add a comment

I have a better idea: tax incandescent lights. A sufficiently high tax (such that compact fluorescent lights are less expensive to purchase) will lead to nearly the same energy savings, while still allowing incandescent lights for those uses where they are superior/preferred. Also, this avoids the dubious legality of outright prohibition of Edison's invention.

Rand LeQuire | Oct 09, 2008 | 9:09PM

Hmm, this story used to have 150+ comments--where'd they all go? Its predecessor column's comments vanished as well.

David Newkirk | Oct 10, 2008 | 5:43PM

Fluorescents don't work well in all applications where incandescents are now in use. And while the mercury content per bulb is minuscule, what's the mercury footprint when we start tossing BILLIONS of deceased fluorescents, in the U.S. alone? I'm hoping we just leapfrog past fluorescents to LEDs. Waiting for the other LED foot to drop - what are their downsides?

Steve | Oct 12, 2008 | 11:01AM
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