How would you spend $50 billion?
Last week I talked about how Warren Buffett got both the American credit rating, and the utility of gold very wrong.
This week, Warren Buffett has made a similarly provocative statement, but one I am more sympathetic to. From the New York Times:
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.
These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.
Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
While I agree that this is a fundamentally absurd situation, and that so-called “progressive” American taxation is now regressive, alas, the economics of the situation are nothing like as simple as Buffett makes out. Namely, if the system is rigged to favour the rich, then the system is rigged to favour the rich. Stating that fact doesn’t change the 20% youth unemployment rate, the record numbers of Americans claiming food stamps, and the simple reality that not enough jobs are being created to fill the supply of people graduating from school, college and being laid off. Tax reform will not directly address any of America’s problems with malfunctioning infrastructure, its dependence on Chinese imports, or its citizens’ addiction to debt: raising taxes on the rich might help pay down the deficit, but so too would cutting spending on wars and the military industrial complex. But while tax reform cannot directly solve these problems, Warren Buffett and his “progressive oligarch” friends can. How?
Job creation. Investment in infrastructure. Investment in young people. Look at the humungous of levels bank reserves. There is cash just sitting idly that could instead be channeled into real investment in jobs and infrastructure — the kind that Paul Krugman calls for, just without the government involvement (or the Alien invasion). No doubt government has its own role to play. But why run sheepishly into the arms of government when the private sector has the means and resources to solve many of the humanity’s challenges — and at a profit? So without further ado, here’s where I would invest my money ($50 billion), if I were Warren Buffet:
- Carbon-Scrubbing Trees:
While we don’t know exactly what effects climate change will have on Earth, we do know that keeping Earth’s carbon dioxide level as close to the pre-industrial baseline as possible is undoubtedly a good insurance policy. And doing so could undoubtedly create a lot of jobs. Carbon scrubbing trees allow us to do that by removing carbon dioxide from the air and releasing oxygen using a carbon dioxide removal process called “humidity swing.”
- Synthetic Oil
The biggest advantage of investing in technology and infrastructure that can remove carbon dioxide from the air? It means that we can continue pumping out carbon dioxide, but with a clear conscience. And there is technology that exists today — namely oil-excreting photosynthetic bacteria — that allows for the creation of synthetic oil, at a cost of just $20-30 a barrel. From Joule:
Free of the land and resource constraints that hinder biofuels, Joule will directly target fossil fuel replacement with unprecedented volumes of renewable diesel, at a fraction of the land use incurred by current methods. At full-scale production the company projects delivery of up to 15,000 gallons of diesel per acre annually, at costs as low as $20 per barrel equivalent including subsidies.
While solar energy may not in the short term be able to meet all of our energy needs, the solar energy hitting the earth exceeds the total energy consumed by humanity by a factor of over 20,000 times. More solar energy hits the world in a day, than we use in fifty years, at current rates. And it is about time we set about harnessing it. The Desertec project — and other such similar large-scale solar projects — invests not only in improving solar technology, but in developing the infrastructure to – for example — meet Europe and Africa’s energy needs by covering parts of the Sahara Desert — land with little other economic use — with solar panels.
- Social Media
Memo to the Pentagon: Want to spread democracy across the globe? What is more cost effective: trillions of war spending in Iraq, Afghanistan and Libya or millions of venture capital in Facebook and Twitter? And which did more to democratise the Middle East? In light of the Arab Spring only Karl Rove would say the military intervention was more cost effective.
- 3-D Printing
Want to manufacture less in China? Here’s how: take manufacturing out of the factory, and bring it into the home and small business. From Wikipedia:
Standard applications include design visualization, prototyping/CAD, metal casting, architecture, education, geospatial, healthcare and entertainment/retail. Other applications would include reconstructing fossils in paleontology, replicating ancient and priceless artifacts in archaeology, reconstructing bones and body parts in forensic pathology and reconstructing heavily damaged evidence acquired from crime scene investigations.
3D printing technology is currently being studied by biotechnology firms and academia for possible use in tissue engineering applications where organs and body parts are built using inkjet techniques. Layers of living cells are deposited onto a gel medium and slowly built up to form three dimensional structures. Several terms have been used to refer to this field of research: Organ printing, bio-printing, and computer-aided tissue engineering among others. 3D printing can produce a personalized hip replacement in one pass, with the ball permanently inside the socket, and even at current printing resolutions the unit will not require polishing.
The use of 3D scanning technologies allow the replication of real objects without the use of molding techniques, that in many cases can be more expensive, more difficult, or too invasive to be performed; particularly with precious or delicate cultural heritage artifacts where the direct contact of the molding substances could harm the surface of the original object.
What’s needed? More investment to bring the cost down, and create a new range of beautiful, standardised and transportable 3-D printers, that can do for 3-D printing what the PC did for computing.
- Space Mining
Concerned about resource scarcity? There’s plenty more up there. Last year, scientists confirmed that there was water on the moon. And there are metals and hydrocarbons abundant in asteroids. From Anthonares:
When planetary bodies form, the heat from their formation melts them and allows for planetoids of sufficient size to differentiate. Differentiation means that heavy elements sink to the core of the body while lighter elements remain on the surface. This is what happened on the Earth, which is why we have a metallic core. Since iron and nickel are nowhere near as heavy as some of the other metals, why don’t we have a lead and uranium core? Well, we do, kind of. But due to the nature of the iron and nickel nuclei, they are the last elements that are readily formed in the fusion in stellar cores. Heavier elements must all be formed in supernovae, thus they are far less abundant throughout the solar system. Likewise, metallic asteroids do possess copper, silver, gold, and all other such elements as well, though not in abundances anywhere near as large as those of their primary constituents.
If I can venture into the realm of speculation a bit, asteroid prospecting will be an important endeavour because somewhere exists an asteroid rich in copper, and another in silver or gold. But even if a “typical” M- or S-type asteroid is mined, significant quantities of all these metals will accumulate. These rarer metals will be vital to continued development on Earth and may be used to subsidize the extraction of iron and nickel that are, for now, plentiful on Earth. These metals would then be used for space infrastructure development. The trade revenue earned from sending back rare metals could then be used to purchase value-added goods such as electronics and health supplies. Perhaps the platinum group metals will be the catalyst (heh, heh) for profitable asteroid mining, but once we’ve paid the price to develop infrastructure there, we might find it far cheaper to extract nearly pure metals in space and send them back home.
I am barely scratching the surface here. To ensure the sustainability and viability of humanity on planet Earth into the 22nd Century and beyond, there is so much left to accomplish. Let’s just do it.
warren wasn’t so candid 2 decades ago…tool!
“I used to believe in the investment theories of Benjamin Graham and Irving Kahn. That was until I discovered Paul Krugman.”
Maybe I should run an article on Howard Graham (Warren’s father)? Now HE was a patriotic guy…
Heck yeah this is exactly what I neeedd.
Synthetic Oil is a reasonable solution however it also in many countries would compete with food-producing land so this is definatly an issue overlooked by many. And it requires quite a bit of Sun.
Desertec: Is a abysmal concept, it is centralised and can be controlled by a happy few also, the current elite is proponent of Geo-stationary positioned Solar harvesting plants, that beam back the energy to earht based-central stations.
There is an abundance in technology available that can do this small/micro scale that could power each home/room individually. However they are not financed by our Banks/Elite. There we have it again, the issue of finance. It’s time we pull back our money from the system.
Social Media, Has also downsides, refering about libya to spread democracy is outrageous and naïve. There weren’t any Nato-planes supporting the people in London who were rioting. If Ghadaffi was really that impopular amongst the majority he would be dead. i refer to interview with Dr Moussa Ibrahim (http://www.youtube.com/watch?v=yVjceJSMN-I&feature=player_embedded)
It is immoral to decide what is democratic or not. Everything in life can be spinned, so can social media it is the most overhyped medium of the past 5 Years. And also comes with alot of dangerous downsides.
Furthermore the analogy with Trillions versus millions is flawed, there was a uprising in Iraq in the past. that could have been supported back then. but it wasn’t and several 10s of thousand people got slaughtered for a democratic cause.
3D printing is awesome, printing youre spare parts, no more warehouse filled to the brim possibly with products that never will be consumed. However the amount of money invested in this sector is laughable versus the investment in Centralised “Green Technology” Wind/Solar/Bio or even Tidal.
Space mining, sure everything is possible, the sky is the limit. However shall we first solve the problems in our current, Energy/Financial Eco system, There is abundance for mans need not for mans greed.
Now am i a pessimist most definatly not, i’m involved in a Dutch/German/Swiss research group that is in the 3rd Generation Solar technology that yields 3 to 4 times more Energy on a daily average not on the current “semantic” peak basis that currently comercialy is available. However i do want to stress that the current Status-Quo in our society are bussy with Symptoms,
i see so many Social media “Specialists/Guru’s” Popping from the soil like mushrooms. That i’m concerned that people are unaware and lack the sense of urgency for the dire situation we are currently in.
The breakthrough of these above technologies/routes must come swiftly, and i encourage everyone to participate in these kind of discussions. But what we are doing on blogs like this zerohedge you name it is unfortunatly still a very limited crowd
God Speed !
Hi Marcuz. Thanks for your continued contribution. A few points:
1/ Synthetic oil does not really compete with food-producing land like biofuels do. The Joule, Inc. vision is something more like hydroponic skyscrapers, but with vats of diesel-excreting bacteria soaking up sunlight and churning out diesel. And if we run into problems with land for food there are always hydroponic skyscrapers, arcologies, etc.
2/ I am very ambivalent about NATO in Libya. The real example is Egypt, which overthrew a repressive US-backed dictator. Sure, what has replaced Mubarak is not perfect, but Twitter and Facebook achieved far, far more than the war in Iraq did. A side note: i reject the analogy between the political protestors in MENA, and the violent consumer-electronics-stealing looters in Britain. Entirely different culture. Oil and food prices are the only thing the two groups have in common.
3/ I am very glad you’re involved in the solar industry. I know a huge problem with harnessing the sun is that a lot of solar cells don’t absorb many light frequencies. Keep us up to date.
4/ Space mining is the most far out, but probably also the most important technology because it addresses the problem (and it is a huge problem) of resource depletion in a way no other technology or model can.
Well you raise interesting topics, even if this blog has only 2 or 3 readers i don’t care. ill keep discussing with you ! its a good mental excersise.
And you you approache from alot of angles. wich is good it keeps ones mind sharp.
Well it requires about an acre for 15,000 gallons of diesel, i’m not entirely familiar with the technology. but here in the Netherlands we have alot of fertile soil so it would definatly compete with our food production here, i’m sure it’s not much diffrent for you in the UK.
And the remark about London riots is placed in the context of equality. My personal judgement is maybe biased on basis of that press-conference in libiya but then again. How often has a coup d’etat been commited on basis of the right pretenses.
Well for me i’m very excited about our work in the solar team we have forged in the 3 countries. It has been absolutely a blast the past 2 Years. and tommorow we have an Internal “product launch” at 15:35 CEST in Deventer The Netherlands. which will be an hallmark for the teams concerted effort. and we wil showcase a technology that undershoots the price of coal powered electricity by 10%.
Luckily for us we are in the fortunate situation that Germany is betting heavily on Green Energy transition (16-20% of current power is Green) and Switzerland has a huge surplus of money to spend on Innovation. Today they have launched a 2,5 Billion Euro weighing programme to stimulate inland innovation and compensate the sectors that suffer from High swiss-franc prices.
Thanks Marcuz and good luck with your product launch. Just to let you know — I have been getting 1500+ hits daily for the last 10 days, as well as many shares on Twitter, Facebook and various financial sites. Not quite as popular as Paul Krugman or zero hedge, but azizonomics is getting established.
Keep up the great work aziz, truly inspiring and thought provoking!
To help with your analysis on item 3: http://chipdesignmag.com/lpd/speers/2009/11/12/connecting-the-dots/
Thanks Ted, I’m glad that some of my friends are working on #3
Actually not working on that. I was asked to blog for my company at one time and I wrote about what interested me that could plausibly be connected to what I was being paid for. In this case, we were making low power chips for handheld devices. I decided I wanted to know how much power the world had/needed/consumed.
I’d say that counts as “working on it”, Ted, or at least putting the resources you had to the best use possible. 🙂
Hello, greetings from Seattle, just came across your blog which looks to have much to recommend it. Keep up the good work, I’ll be back.
I’ve long been fascinated by the idea that we could probably reverse the increase in CO2 by investing in carbon scrubbing technology. Submarines have used it for years. BBC World Service’s “Global Business” show did a segment a couple years back with a big proponent of it, name escapes me at the moment, who estimates that for 10% or so of the global energy bill we could insure continued habitability of the planet. Of course it would require collective action. Yet another example of how things don’t have to go to hell if we can just somehow divert even a small portion of global wealth into fixing things, instead of everything going into the pockets of the super rich.
Thanks for stopping by. I think setting up a global carbon scrubbing apparatus can be done cheaply and effectively, and without much global action or even additional global bureaucracy — you just need the equipment and the funding and you are good to go. You would need global funding, but think about the amount we spend globally on war. For less than 0.001% of that we could solve excess CO2. And large scale viability studies can be done through private industry — by someone like Gates or Buffett.
Adam Smith called for government to create “certain great institutions beyond the reach of private enterprise”. And what could be a greater institution than a real insurance policy against climate change? I don’t know what the precise effects of higher CO2 will be. Probably some warming, but we don’t know how much, how fast and what that would trigger. The models we have are imprecise. But what I do know is that hiking atmospheric CO2 by 33% on pre-industrial levels is messing with a big, complicated dynamical system that we don’t fully understand, and that could do very nasty things if it gets out of hand. And I also know that the technology to scrub CO2 is viable today, and much of the money invested can be paid back by selling the resulting calcium carbonate as fertiliser.
Mark Stevenson’s book An Optimist’s Tour of the Future is a good resource for these kinds of ideas. Klaus Lackner is the most prominent exponent of the science.
Have a great day 🙂
Thanks, I’ll take a gander at those books you mention. Optimism is in short supply. I couldn’t agree more with you that now is the time for a Buffett or Gates to step up and take on carbon scrubbing. One beauty of it is it could be done anywhere – we’ve only got one atmosphere. If the recent spate of storms, heat waves, droughts (and lack of a summer here in Seattle,) is a taste of what’s to come, then now is the time to act.
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Hi there. Just came across your blog. What a great article with some great ideas. I haven’t trusted Warren Buffet ever since he started chumming up with the current administration and then made a huge investment into GE right before there was a push for Cap and Trade (which would have enriched GE quite a bit if the scam got through congress). He seems to try to work the, insider knowledge, public-private route with everything he does now.
More jobs would do much more to help this country pay down its debt than higher taxes. Here’s an idea. Why don’t the so called rich invest in all the entrepreneurs out there that want to create their own job and need investment capital? I think an equity partnership would be better than a debt based loan but that’s just my opinion. If Warren Buffett took half of the 7 million he paid in taxes and used that money to purchase 20% equity positions in 100’s of small businesses that need $50,000 or $100,000 cash injections to get up and running or expand, how much tax revenue would the government get back in return from the 1000’s of jobs produced. Someone contributing to the system is no longer taking from it so each job goes a long way.
Thanks for stopping by! You have some fantastic ideas, too! What good would Warren Buffett paying an extra seven million in taxes (as he claims to want to) do when it could go to cash-starved entrepreneurs. in an equity partnership. If the money goes into government it just gets lost in bureaucracy, war and corporate subsidies — things we don’t need. I hope you’ll come back here again, and bring people of a similar mindset!
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spread the news there is an alternative and the more alternatives the less control of a central energy provider creating tyranny and war over control of it. That future must be opposed to the death.
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All of these are potentially useful ways to extend our addiction to energy. All of them will fail when the mathematics of demographics and social mobility kick in. China, India, South American and the Middle East are building a middle class of billions of American style consumers. They will require a MASSIVE, exponential increase in energy and resources. The average American uses 32x the energy of a poor third worlder.
What we really need to do is take a long hard look at why we waste so much.
It really depends how they are rolled out. It is very possible that the world/solar system can support billions of middle class people. But not if we keep making the same mistakes of the past 10 years.
Your place is valuable for me. Thanks!…
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