Thomas Friedman’s “Hot, Flat, and Crowded”

I was introduced to Thomas Friedman as a senior at Linfield College.  My finance professor invited a guest speaker in for a lecture.  I don’t remember who the speaker was or what the topic of the lecture either but I do remember he was raving about a book he had recently read entitled, The Lexus and the Olive Tree.  He recommended that we all read it so I picked it up.

With that book I came to appreciate Friedman’s ability to evaluate complex conditions from a “10,000 foot view”.  This is probably most evident in his book The World is Flat.  Each of these two books ends with somewhat of pessimistic conclusion that sounds much like a doctor telling a patient about their fatal illness that has little or no chance of healing.

This pessimism is absent in his newest release entitled Hot, Flat, and Crowded-Why We Need a Green Revolution and How it Can Renew America.  Instead, Friedman not only accesses the ills that face our environment but also recognizes the opportunity that the US has to lead the world in innovation and a more sustainable way of life.

Here are my notes:

*Friedman argues that the US has effectively become fat and lazy:

“In some ways, the subprime mortgage mess and housing crisis are metaphors for what has come over America in recent years: A certain connection between hard work, achievement, and accountability has been broken.  We’ve become a subprime nation that thinks it can just borrow its way to prosperity……”

*Friedman argues that as a nation we seem to think less about the collective national interest.  Furthermore, we fail to think long-term in a lot of areas.

*In the wake of ’73-’74 oil embargo we didn’t invest long-term in fuel alternatives to derive energy.  In contrast, Japan invested heavily in conservation while France invested heavily in nuclear power from which they get 78% of their energy today.

*In recent years the government has not asked for public involvement in fixing our problems.

*Friedman states:

the “….post 9/11 performance was one of the greatest squandered opportunities for American nation-building in our history.”

This is because the population was motivated to get involved but the government failed to ask.

*Royal Dutch Shell predicts that from 2008-2050 all forms of energy consumption will double.  However, I would guess it would double even faster than that.  At 5% growth consumption would double every 15 years (using the rule of 72).

*Projections of global warming:

“Since we can’t stop C02 emissions cold, if they continue to grow at just the mid-range projections, “the cumulative warming by 2100 will be between 3 and 5 degrees Celsius over pre-industrial conditions,” says the Sigma Xi report, which could trigger sea level rises, droughts, and floods of biblical scale…”

*Quoting an essay in the New York Times about consumption:

“A real problem for the world is that each of us 300 million Americans consumes as much as 32 Kenyans.  With 10 times the population, the US consumes 320 times more resources than Kenya does…”

*Friedman discusses the concept of a “cradle to cradle” economy in which everything is recycled.  Instead of buying things people would lease them.  For example, instead of buying an appliance, a person would lease it from the manufacturer.  Once it had ended it’s useful life it would be returned to the manufacturer who would then reuse the material.  This would shut down on resource consumption.

*More on “over-consumption”:

“…the average American consumes enough energy to meet the biological needs of 100 people…..By comparison, China and India currently consume approximately 9-30 times less energy per person…”

*Peter Schwartz sums up America’s energy policy for oil:

“Maximize demand, minimize supply, and make up the difference by buying as much as we can from the people who hate us the most.”

*Friedman argues that 9/11 was a missed opportunity for the US to “end our addiction to oil” because we could have asked the population to participate in the sacrifices in the name of patriotism.

*Friedman points out that the style of Islam that benefits from the oil infrastructure of the middle east is one which is much more “puritanical” than the “softer-edged” Islam which is more prevalent in areas such as Egypt.  It got me thinking, I wonder if there exists a positive correlation between the incidence of terrorism & the price of oil (the argument being that when the price of oil increases>money flows into more fundamental Islamic messages which translates into more terrorist attacks).

*On the next page (pg. 94) Friedman draws a negative correlation between the price of oil and political freedom in the middle east.

*Friedman on the benefits of renewable energy:

“…the world will be a better place politically if we can invent plentiful renewable energy sources that eventually reduce global demand for oil to the point where even oil-rich states will have to diversify their economies…”

*Friedman on “going green”:

“That is why going green is no longer simply a hobby for high-minded environmentalists…It is now a national security imperative.  Any American strategy for promoting democracy in an oil-rich region that does not include a plan for developing renewable energy alternatives that can eventually bring down the price of oil is doomed to fail.”

*Ray Kurzweil suggests that people have difficulty grasping exponential change.  This got me thinking that this is why people have difficulty saving money for retirement (which earns exponential returns in the form of compound interest).

*Friedman on pricing in externalities:

“Because in a world that is hot, flat, and crowded-where energy, water, land, natural resources, and energy resources are all being stressed- everybody, in time, is going to be forced to pay the true cost of energy they are using, the true cost fo climate change they are causing, the true cost of biodiversity loss they are triggering, the true cost of the petrodictatorship they are funding, and the true cost of the energy poverty they are sustaining.”

*Friedman is not suggesting that small incremental changes in how we conduct our lives will make a difference.  Instead, he believes a systematic overhaul is needed:

Jonathan F.P. Rode: “Optimizing individual components can only lead to incremental change; optimizing the system can lead to a transformational ecology.”

*Friedman believes that a “green movement” DOES NOT have to work against the economy.

*Under a regulated marketplace, “Utilities made their money by building stuff- more power plants and more power lines that enabled them to sell more and more electrons to more and more customers- because they were rewarded by their regulators with increased rates on the basis of those capital expenditures.  (Instead of being rewarded for increasing efficiency)

*Friedman on creating incentives in place of regulations:

“We are not going to regulate our way out of the problems of the Energy-Climate Era.  We can only innovate our way out…”

*When oil prices fall, it places a dis-incentive on energy innovation.  Friedman suggests a variable tax which would place a floor price on a barrel of oil at $100.  When the free market price for oil drops below $100 a tax would be imposed to bring it up to $100.  This would create a permanent incentive for innovation to replace oil.

*Bubbles create rapid innovation in the industry that is experiencing the bubble.

*Machiavelli on the courage of leading:

“It ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introducing a new order of things…”

*Friedman makes the argument that a gasoline/ carbon tax would increase the cost and encourage green innovation.  The problem is that taxes are unpopular.  Friedman’s suggests that if framed properly the American public may support such a tax.  He suggests that we are currently being taxed but that we’re being taxed by Saudi Arabia, Iran, Russia, Venezuala, “and if we continue on this track…Mother Nature”.

*I read the book Natural Capitalsim by Armory Lovins & Paul Hawken a while back.  One of the major themes of that book is that green innovation often comes with unintended benefits.  Friedman also highlights this theme by writing about the GE diesel locomotive.  GE designed this new locomotive in response to stricter EPA emission standards.  The GE design not only reduced emissions but also improved fuel efficiency which has improved their competitive position in that industry.

*Pollution= Waste:

“…pollution is simply waste:wasted resources, wasted energy, wasted materials.  Companies that eliminate such waste will be using their capital, technology, and raw materials more productively to generate maximum value and, therefore, will become more competitive.”

*Texas Instruments plant.  Friedman uses a new wafer plant that Texas Instruments built a few years ago as an example of how energy efficient buildings can not only be cheaper to operate but cheaper to build.

*Friedman also discusses how LEED certified buildings are shown to have higher occupancy rates, rental rates, and values.  However, per his previous point, they may not be any more expensive to build.  Therefore, as soon as real estate developers understand this more LEED buildings should be constructed.

*On the topic of utilities Friedman points out that the current incentive system DOES NOT promote efficiency.  He believes that,

“The ideal situation is that the utility makes more money by pushing you to save more electricity- so the utilities profits go up and the customer’s total bills actually goes down…”

*Breakdown of US’s current sources of energy production:

“….right now about half of America’s electricity comes from burning coal, 20% from nuclear power, 15% from burning natural gas, 3% from burning oil, 7% from hydropower, and 2% from burning wood and geothermal, solar, and wind sources.”

*Friedman points out that he believes that conservation and a healthy economy can exist.  In fact, political leaders must establish policy with ecological and “people” considerations in mind.

*Here’s an interesting point that I thought was interesting (parents take note):

“Biological, health, and economic data indicate that children who connect with nature perform better in school, have higher SAT scores, exhibit fewer behavioral challenges, and experience fewer attention deficit disorders.”

*Friedman arguing for the long-term value of wind and solar energy production:

“Solar and wind power may be more expensive to install today, but the price of fuel- sun and wind- are fixed.  They will be free forever.  Fossil fuel systems may be cheaper to install today, but the prices of these fuels- coal, oil, and natural gas- are constantly fluctuating, and with carbon taxes of one kind or another part of the future and demand for these fuels steadily rising, in America and elsewhere, they are clearly headed upward in price.”

*When people measure their consumption it becomes behavior-changing.  For example, those who track their spending habits make decisions to spend less money.  Thos who track their consumption of energy make decisions to consume less.

*Friedman believes that the government should fund research to create breakthroughs.  The free market can take it from there:

“Government’s job is to seed the research that will produce the sorts of fundamental breakthroughs in chemistry, materials science, biology, physics, and nanotechnology that open the way for whole new approaches to solving energy problems….  Venture capitalists can then pick off the most promising ideas and try to commercialize them.”

*Friedman describes the problems in the bureaucracy of utility of improvements.  Specifically he tells the story of a project in California that started in 2002.  The construction timeline is only 2 years.  However, they don’t expect to be done until 2013 because of the permitting process.

*Michael Mandelbaum, a Johns Hopkins professor, makes an interesting point on why long-term environmental interests are not represented in the political process.  Climate change pits:

“…the present versus the future-today’s generation versus its kids and unborn grandchildren.  The problem is, the future can’t organize.  Workers organize to get workers rights.  Old people organize to get health care.  But how can the future get organized?…”

*Friedman responds to Mandelbaum’s point by answering:

“An unusual situation like this calls for that ethic of stewardship…”

*The current system for energy regulation needs to be streamlined into a common oversight entity.  Here’s a snapshot of the current framework:

“Local and regional utilities…are regulated by states…  The Environmental Protection Agency oversees air quality, water quality, and fuel quality standards.  The Department of Transportation…is responsible for setting auto and truck mileage standards.  The Department of Energy’s Office of Science is the biggest source of funds in the country for energy research.  And the DOE has responsibility for setting efficiency standards for appliances and the national model building code.  The Department of Agriculture has a big say in ethanol production.  The US Army Corps of Engineers oversees the building and maintenance of many of our hydroelectric damns, while the Fedral Energy Regulatory Commission oversees interstate electricty transmission lines and the Nuclear Regulatory Commission regulates the building and operation of nuclear power plants.  It’s the president’s Council of Economic Advisers that rules on the economic viability of any energy initiative.”  (it actually goes on-see page 408 of hardback edition)