Societal Change Is Hard

Doesn't mean we shouldn't try

Hey There,

I was going to write something about product costing and visibility into cost drivers and sources of margin, but someone sent this satirical Chevron commercial to me and after watching it I wanted to spend some time expanding on what I consider to be the crux of our whole climate change issue: societal change.

The commercial is funny, in a gallows satire sort of way, but I think it exposes a deeper flaw in our understanding of climate change. Chevron, Big Oil, and Chemical Companies are 100% part of the problem, but so is our current way of life. If oil and downstream oil products were drugs then Chevron, Shell, DuPont, Dow, and BASF are the drug dealers and we are the addicts that cannot stop buying. To be fair to humans there aren’t a lot of other options…yet. Buying an EV, solar panels, and a home battery pack will not 100% absolve you from the crude oil/natural gas supply chain.

To be clear my position is the following:

1. Climate change is happening right now

2. Humans are contributing significantly to climate change

3. Humans need to stop contributing to climate change by changing our way of life and economies

I don’t want to debate points 1 or 2 because it’s fact. Shell and Chevron want you to keep arguing about points 1 and 2 because it keeps you from looking at point 3 in any meaningful way because point 3 is where they make all their money.

I care about point 3 a lot. It’s part of why I went to graduate school and its fundamental to my thesis work and this newsletter.

Extraction, refinement, and transformation of crude oil has irrevocably transformed human society. Synthetic polymer chemistry is one spoke on the wheel of change we have called progress for the last 100 years. I have spent the last 2 years trying to show how synthetic polymers and crude oil are both essential and instrumental in our current way of life through the newsletter. This irrevocable transformation has resulted in a modern society here in the United States and Canada that is almost completely dependent on personal automobiles as a means of transportation and has unlocked the beauty and horror that is suburban sprawl.

Our inability to get away from sprawl and personal automobiles (EV or otherwise) is part of our addiction to the drugs that are refined crude oil, chemicals, and synthetic polymers. You might be able to run an EV completely on solar energy, but there are hundreds of parts in your EV that are dependent on downstream crude oil transformations such as the rubber in the tires, that glossy paint covering the car, and the cushy heated seats that you can sleep on while Autopilot delivers you to the promised land.

The production of manufactured goods has been a dirty and polluting business since the industrial revolution started. If we look at depictions of early industrial era factories, the workers are often covered in soot, grime, or worse. Wages were terrible and living conditions were horrific. Much of these things have improved over the last 100 years, but you wouldn’t want to live next to a modern factory much in the way you wouldn’t want to live next to a busy highway. Cancer alley is a good example. Here is a fictionalish depiction of post World War I Birmingham if you want a visual:

Part of improving the quality of our cities has been driven by exporting these dirty businesses to other parts of the world or the countryside where there are less people to complain or less environmental restrictions. This willful determination of ignorance is maybe the best way to live because it enables a relatively guilt free life. If you actually knew how all of your stuff was made, the depths of that supply chain, and how difficult it is to get things changed then you might become a cynic. I’m here to be both critical and optimistic and to try and educate if possible.

The EPA exists and regulates air and water pollution limits because we as a society (here in the USA) decided that having rivers catch fire and being full of carcinogenic fish was a bad look for the country. This movement of production away from cities has enabled cleaner air in our cities and it was partly enabled by mass production of automobiles (lowered cost) and rising middle class wages. Rural areas and developing countries are more similar then they are different, but the key thing here is that to work and live in a rural area you need an automobile, ideally a truck with 4 wheel drive (Dual rear tires for style points).

There was a point in time when a high school graduate could buy a car, a house, and support a family on a manufacturing salary. The car would allow this person to get from their house to a factory and a grocery store and it ran on gasoline refined in Texas. The car was made from steel smelted locally, it was probably built in Michigan, and it ran on rubber tires that were made somewhere in Ohio (likely Akron) from crude oil that was likely refined in Texas.

This person likely wore clothing made in the United States and boots that were made in Maine and these things were made to last for years, if not a decade or more. If there was a rip in a shirt or a boot needed to be resoled this could be done easily. This period of time was post World War II. Houses, cars, and fuel were abundant and relatively cheap, but inflation of assets and a need to still drive everywhere without an increase in wages has enabled a country where it is difficult to support yourself on a manufacturing salary let alone an entire family. This is bad.

Our society has moved on from this “golden middle class era” and globalization has occurred. It’s less likely that our goods are manufactured locally and the manufacturing that is still remaining does so by paying their workers wages that can barely keep up with the cost of living. If you are in manufacturing or an extractive industry that still exists in the US/Canada and you get paid a lot its probably because your job is dangerous and it would be hard to replace you (these are the operators and maintenance staff working in chemical plants).

Globalization and free trade have done wonders for other parts of the world. Capitalism and free trade have pulled more people out of abject poverty than any non-profit or international aid organization could hope to achieve. Places like South Korea, China, Singapore, Vietnam, India, and Indonesia (to name a few) have grown and become more industrialized over the last 40 years just as places like the United States have become more knowledge focused and a worse place for those without advanced degrees and certification. There is a reason why immigrant parents want their kids to be in financiers, lawyers, doctors and engineers.

As globalization has unfolded companies such as Chevron and Exxon have become global entities themselves and supply these new factories that have popped up all over the world. Fossil fuels power the airplanes that shuttle people across oceans in hours and they power the cargo ships that ferry our electronics from Shenzhen to Los Angeles. Burning natural gas supplies electricity that keeps us warm in the winter, cool in the summer, and powers the remaining factories we have left here in the United States, Europe, Canada, Mexico, etc. Natural gas is essential for industrial and knowledge economies.

Our whole way of modern life is dependent on crude oil and natural gas. The more you or I consume the more refined oil and electricity we need. This modern life that is dependent on oil and natural gas includes the obvious stuff like plastic, rubber, and synthetic materials, but it also encompasses computers, electric vehicles, clothing, furniture, and food. It’s easy to cast Big Oil and the Chemical Industry as the bad guys, but without them we would be stuck in a pre-industrial revolution society riding horses and plowing fields with oxen. Just as we needed crude oil, coal, and natural gas to move past being an agrarian society we still need this stuff as we try to transition to whatever we decide to become next and that future is still up for debate.

We need to simultaneously look at changing our model of linear consumption while also consuming less, but reducing consumption almost always looks like economic destruction. Needing less future energy and less future materials from crude oil is the way, but how do we get there?

The Future

When I think about the future I envision a time and place where we can grow most of what we need and we don’t need to drive places. I envision a place where we can live next to sites of manufacturing because they do not pollute and energy is not only abundant, but essentially free and a basic human right just as clean air and water are a basic human rights.

In order to see this happen we need to radically change how and where we as humans live. If we, as a society, want to decrease our dependence on material goods and enormous amounts of energy then living in dense, clean, and accessible cities that are safe is essential. In order to have these types of cities we need better models of housing that are both more accessible from a pricing standpoint and more energy efficient.

Affordable and accessible cities is a the way to reducing the need for companies like Chevron or Exxon to exist. Right now if we look at major coastal cities such as Boston, New York, The Bay Area, or Los Angeles it’s unlikely that lower income professions such as teaching, cooking, or driving a bus will pay the bills to live in that city. If you send your kids to a public or private school in these big cities your kid’s teachers are probably struggling to just pay their bills or they also have a 45-60 minute commute one way to work their job. People commute because when their jobs are location dependent and the wages cannot keep up with living locally they live somewhere else. If we concentrated everything into a city with good public transit and made it so that people could either walk, bike, or ride their way to work then we could reduce a lot of unnecessary emissions and material consumption.

If we are living in dense energy efficient housing then this means we would also need access to excellent public parks that are designed by a modern Frederick Law Olmsted. Parks can provide a place to gather as a community, workout, run, store drinking water, and have concerts. If you live in a rural countryside then you might appreciate the irony that it’s hard to go experience nature unless you own a car or 100+ acres of land and if you want to go for a run or a hike then you are going to be doing it on the side of a busy road or driving to someplace like a gym to go workout.

If we take away the need to drive cars to get to places like offices, factories, schools, parks, and grocery stores because everything we need is mostly accessible via walking on a daily basis then our energy needs plummet.

If our housing is dense, modern, and energy efficient our energy needs plummet.

If our consumables last longer and are more readily fixed we need less stuff and our energy needs plummet.

If we can manufacture the new stuff we do need from our own material waste or biomass either through traditional synthetic chemistry, room temperature synthetic biology, or a chemoenzymatic processes, or recycling then our dependence on crude oil and our energy need plummets.

In this future world we would look back at our present society and marvel at our abundant energy production and abundant energy waste. Just as we look back and marvel at the thought of actually having to plow a field, go pull carrots by hand, or not having antibiotics.

In the future maybe doing things like gardening, crafting elegant topiaries, or an equivalent will be sources of entertainment and our economy will only be partially driven by material consumption. Perhaps instead of aspiring to become a financial wizard who makes money from other people’s money our best and brightest will aspire to be entertainers, brewers, and growers.

Maybe I’m just dreaming. What does your future look like?

Tony

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Hey, welcome to the margins of the newsletter. The stuff down here is maybe related to the stuff up there, but its reserved only for the people who make it to the end of a post. Downton Abbey vibes not intended. When writing the stuff up above I kept coming back to this scene in the movie Margin Call (one of my all time favorites). I can’t find a clip but essentially a young banker is crying in the bathroom because he is about to be laid off during the start of the great financial crisis at a fictional Lehman Brothers. His manager’s manager walks in to shave and asks this young banker if he’s OK. The young banker tells him this is all he had ever wanted to do in life and he was about to lose his job. The manager looks at him and asks, “Really?” The look and the “Really?” indicate that we can do better than to aspire to be a banker.

Also, is that shit gonna happen again? Looking at you Credit Suisse CS 0.00%↑

I think we have some choices early on in our careers where we can decide that we want to either a) build a better world or b) just try and be rich. I think if you build a better world and you succeed then ultimately you will get the riches commensurate with your success. Or at least I hope so. Here is a different clip from Margin Call all about building bridges. The movie is incredibly bearish/cynical, but it is worth rewatching.

As Marc Andreessen says, “It’s time to build,” but preferably not in his city and ideally somewhere over there where he can’t see you unless it’s a software business that could make him a lot of money in which case here is $100 million, or if you are Adam Neumann here is $350 million.