Why Efficiency Rocks

Back in July, two fellow members of my Toastmasters club gave speeches outlining their views on global warming. The first explained why he believed the science was shaky and that the issue was being used mostly as a political power-grab. The next week another offered a rebuttal, arguing that global warming is a genuine, imminent danger.

Naturally I decided that I’d like to speak on the topic as well. It seemed as if our members were fairly polarized on the issue though, so I decided to take a little different route.

It’s rehashed a bit from the outline, but the speech I gave on 9/14 was similar to this:

While the science behind the global warming debate is certainly important, I don’t believe the uncertainty should affect our actions much.

Imagine that we conclude that global warming is not a threat, and realize in 20 years or so that we were wrong. At that point we’d probably be up a creek.  But what about the opposite error? If we agree that global warming is a serious threat, and happen to be wrong, it might just be the most beneficial mistake in history.

The reason is because many of the solutions that fight global warming will benefit the entire planet, regardless of whether global warming exists at all. One such solution is the cheapest, cleanest, and most readily abundant source of energy that we have today- efficiency.

By focusing on the demand side, efficiency means that we don’t have to create as much energy in the first place, and this directly benefits us in several ways.

1.)  The first benefit should be obvious- efficiency saves money.

We simultaneously have a *likely* climate crisis, and we’re in a long-term financial mess, so why not attack both problems at once? No matter what your stance on global warming is though, it’s hard to argue against a fatter wallet.

Some changes, such as driving more sensibly, can literally save money in an instant. Others, like installing a programmable thermostat, require an upfront investment but will easily pay for themselves in time.

2.) In addition to saving money, efficiency would help us become more energy secure.

The energy crises of the 70s proved how overly dependent we were on foreign energy. In response, tax credits were rolled out to promote clean energy, speed limits on highways were lowered, and President Carter even had solar panels installed on the roof of the White House.

But in time the crisis passed, cheap oil returned, and President Reagan tore down the solar panels. Now here we are, over three decades later, and energy imports are still our lifeline. Somewhere along the way we must have missed the memo that said- “those who fail to learn from history are doomed to repeat it.”

Then there’s the even bigger issue of how much oil is left. Less than a century ago Texas and Oklahoma were practically drowning in the stuff. Now the world uses over 80 million barrels every single day, and we have to go to the ends of the earth to find it.

Some scientists think we’re near the point of peak oil, which is where global oil production tops off and then gradually falls thereafter.  If we weren’t ready for it, which at this point we are not, peak oil could be extremely painful and destructive. Prices would skyrocket as we’ve never seen before ($150 oil might seem cheap before long) as a falling supply fails to meet demand.

To correct these mammoth problems, we need to things; clean, domestic energy and more efficient lifestyles. Moving towards renewable energy sources takes a great deal of time and money, but many efficiency practices can be implemented today.

3.) The third reason to embrace efficiency is for the sake of the earth.

Humanity has wreaked an enormous amount of damage upon the earth, a good portion of which can be attributed to our voracious energy appetites.

In the March 2009 issue of National Geographic, there’s a lengthy article discussing the oil sands projects in Alberta, Canada. Since traditional oil fields are becoming more and more difficult to find and drill from, our friendly neighbors to the north are tapping into less conventional sources of black gold. The oil flows at a tremendous cost to the environment though.

At this point in my speech I had the magazine passed around after pointing out two pictures- one showing the pristine landscape before the oil companies move in, and the second showing the barren world after operations began. You can see these same pictures here.

The irony is, that drilling is considered economic progress. The oil company will probably see its profits increase, shareholders will be happy, and the GDP will increase as well. Econ 101 would consider that to be a success, but it’s hard for me to see how anyone actually wins when we treat our planet like that.

We don’t all have to become full-fledged tree-huggers, but we do need to work to lower our personal impact on the environment. Living more efficiently happens to be one of the simplest ways to do just that.

~

The U.S. is numero uno in many different ways, many of which aren’t worth bragging about. Here is one such statistic- with about 5% of the world’s total population, we use about 25% of the world’s energy. Global warming or no, we would reap many benefits by working to reduce this imbalance. It should be a no-brainer.

Save Energy, Money, and the Planet with Negawatts

Eco-conscious citizens are crying out for clean sources of energy; wind and solar power, geothermal, smart grids, hybrid, electric, and fuel cell cars…the list goes on. We know that, with the climate crisis threatening the well-being of the entire planet, developing cleaner energy sources is crucial and urgent.

Lucky for us, the quickest, easiest, cleanest, cheapest, and most readily available source of energy is already within our capacity. On a widespread scale, we can tap this resource far more than we currently do. Best of all, it hardly costs a thing. In fact, in many cases it will actually put money back in our pocket.

I’m referring of course to becoming more energy efficient. We focus a great deal of attention on where our energy comes from, more so than we examine how we actually use it.

Even with a monstrous effort, it will take decades to overhaul our sources of energy. Advances in technology, infrastructure development, and capital raising can only progress so quickly, especially since our country has grown into an empire entirely dependent upon cheap, abundant fossil fuels.

Energy efficiency can help close the gap between the supply of clean energy and our energy needs, a gap that is currently filled by burning fossil fuels. In reducing the amount of energy that we need to create, efficiency is essentially a source in and of itself (this is the Negawatts concept). Despite the numerous benefits of becoming more efficient, we’re still a nation that apparently enjoys being wasteful.

We have made positive strides- CFLs are now commonplace in American homes, compact cars have reemerged from the dead, and we’re a bit more mindful about our thermostats. However, we are still embarrassingly wasteful, from seemingly trivial individual habits to the global operations of Fortune 500 companies. We’ve picked a lot of low-hanging fruit, but there is much more work to be done.

Consider our driving habits. If you jump on any highway in the U.S. and drive the speed limit, it won’t be long before you feel like a slug. Even semis will blow your doors off. Our lead-feet bode well for the budgets of police stations and the Highway Patrol, but we burn through copious amounts of fuel in the process. Of the 20+ million barrels of oil our nation uses every day, I wonder how much is burned simply by speeding drivers. How much money and energy could be saved literally overnight if we would simply change behaviors like these? It would be substantial.

Seriously, the speeding thing irks me. We’re in an economic meltdown and 90%+ of all American drivers are still voluntarily throwing money down the drain by little habits like these. What gives?

Efficiency has been mostly ignored in the United States, probably due in large part to our cheap energy supply. We could afford to be ignorant to our wasteful ways. People don’t conserve resources that are abundant and cheap. That spells big trouble when those same resources suddenly aren’t so plentiful, nor inexpensive.

It would have amounted to political suicide to even mention the possibility, but had we gradually made burning fossils fuels more expensive (as Europe does with their high gas taxes) long ago, our economy would be light-years ahead of where we are today. Unfortunately though, the crooked politicians in Washington seem to care more about their own special interests than the well-being of this country. The lobbyists working on behalf of Exxon Mobil and Chevron have far more clout than anyone pushing for bills that will actually reduce our energy needs, so our government has done next to nothing on this matter.

Then there’s the almighty GDP. We believe that growth is king and our savior. We somehow believe we can develop new technologies that will simultaneously save the planet and grow our economy, no sacrifices needed. Come on, this is America! We don’t save energy, we create new sources of it.

A smaller, simpler economy is all but certain to be our future reality however.  Growth was a major cause of our problems; downscaling is one the solutions. The previous economic model was characterized by gluttony and excess, but the new model won’t be able to accommodate such waste.  We will be efficient by necessity.

Our individual ability to influence national policy may be fairly small, but we can sure make many positive changes in our own lives, which is where real change and progress begins anyway. All Americans are going to reexamine and transform how we live, whether we want to or not. Becoming far more efficient is one of these changes, and it’s beneficial all-around; we can save money (at least in the long run), save energy, and help the planet at the same time. Might as well embrace it now.

Here are some resources that might be of use:

Treehugger
Planet Green
Mother Earth News
National Geographic Environment

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Consumerism, Part 2: Effects

We’re led to believe that buying stuff is generally good. After all, we’re stimulating the economy when we do so. The GDP goes up, stocks go up, employment goes up, and economic progress is made. One might even feel patriotic by spending money, especially on domestically-originated goods or services (the American automakers have been playing that card big-time).

The above effects in and of themselves are certainly positive developments, but there is far more to the picture. Let’s consider a few less-desirable consequences of a material-crazed culture.

1.) Environmental destruction:

The American way of life has literally been destroying the planet. We’re addicted to big houses, big vehicles, big malls, and tons and tons of stuff. The resources to fill our wants don’t come from nowhere- we’ve been overexploiting the world’s resources to get them.

Everything about our current economic system, from destructive resource harvesting to the end waste products, is completely unsustainable. A big problem is that we don’t feel the harmful effects of our decisions. Most of us don’t personally see the clear-cutting of Amazon rainforests, the destruction of acid-rain, or the extinction of another native species. Sure we hear about such tragedies, but hearing and feeling are too completely different things; the former doesn’t often overcome our earthly desires.

We’ve all probably heard the following statistic-with roughly 5% of the world’s population, the U.S. consumes around a quarter of world’s energy. The figures for the solid waste we generate are also extremely disproportionate. The world does not have enough resources for many more people to live a similar lifestyle (or even to sustain the current imbalance for much longer). Unless we quickly move towards embracing a lifestyle that doesn’t trash the environment to fill our gluttonous ways, we are in serious, serious trouble.

I have Paul Hawken to thank for truly opening my eyes on this issue. I recently read “The Ecology of Commerce“, a book I will most definitely never forget. I can’t wait to get my hands on some more of his work, primarily “Natural Capitalism“. I couldn’t recommend Hawken’s writing enough.

2.) Financial health:

Consumerism has absolutely wreaked havoc upon our nation’s financial health , in large part leading to the recent financial crisis (I kind of touched on this here).

We largely set ourselves up for great unleveraging that began last year. Without a lick of common sense, we collectively chased houses, cars, clothes and hoards of other material goods without the means to actually pay for them. Since we didn’t have the money to pay for something right away, nor the patience to save up until we did, we just tapped into the great river of easy credit. Foreigners supplied much of this credit, allowing government and individuals alike to spend beyond our means.

The financial crisis was a major wake-up call- it was if someone rattled our cage and woke us from our dreamland.. The bill (the first installment of it anyway) arrived, and we stared at it in awe wondering how we could have been so foolish.

Thankfully Americans are doing much better nowadays. The personal savings rate is the highest its been anytime over the past decade- imagine that, Americans actually spending less than they earn! Businesses and individuals who provide repair services are thriving, because we’re fixing things rather than automatically throwing them away and buying new. People are flocking to libraries, thrift stores, Craigslist, garage sales, and bulk retailers. We have generally become more thrifty in the past year.

Of course, the big test of our newfound frugality will come when the economy starts to improve. When the nightly news talks about something other than economic Armageddon, will we maintain our sustainable financial ways? Or will we fail to learn from history once again and revert back to material-crazed lunatics?

I believe there’s a pretty strong negative correlation between excessive consumerism and our nation’s financial health. By placing such a high value on physical stuff and wanting it now, we’ve been borrowing against our future.

3. Quality of Life:

This one is definitely more subjective than the first two, but I think it’s still worthy of mention. It’s easy to lose a sense of what’s really important when we get caught up in the rat race of working harder and harder to fund our ever-growing material desires.

Does more stuff actually add more quality to our lives? To an extent, probably. But not to the extremes that we pursue it. Much of the stuff that we buy isn’t to aid in fulfilling a deep desire, or help us pursue something that we’re passionate about. Rather, it’s often a purchase made because of the influence of advertisers, as temporary ego boost, or to use as a status symbol.

Would replacing my reliable Civic with a brand-new ride increase the quality of my life? I’d be on a high for a little while, and the bells and whistles would undoubtedly be cool, but I would conclude that it really would not add more value to my life, so long as my Honda keeps running efficiently and reliably. I don’t have any deep desire that would be fulfilled by having a sweet ride.

I think I’ll keep my trusty Civic and instead continue saving money little by little to fund things like travel opportunities in the future. A trip to the UK would easily provide me personally with more lasting value than trying to appease materialistic impulses.

I don’t want to come across like I’m denouncing the ownership of physical goods altogether. Ever since coming home bruised and beaten after my first time on a snowboard, I knew I would enjoy having a board of my own. At some point in the future, I think I could make that purchase completely on my own accord. Likewise, if a person thoroughly enjoys and derives plenty of satisfaction from owning a sports-car, there’s nothing wrong with that (my vehicle example was about me personally, not a universal criticism of new-car purchases).

What I am trying to illustrate is this; if we act on impulse, let our ego affect how we spend, and succumb to outside influences, our financial habits likely aren’t congruent with who we are. That’s how we can spend years and years chasing money and stuff and yet become more and more unsatisfied as we acquire additional prizes.

Think about how many hundreds of billions of dollars Americans spend every year in a futile pursuit of consumer happiness. How much better off we would be if we dropped the influences of materialism and instead managed our money with 100% consciousness?

I think we would astound ourselves.

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Consumerism, Part 1:

For most of mankind’s existence, scarcity was the norm (for billions, it tragically still is). People spent their entire waking existence working just to meet basic needs. Forget about TVs and iPods and suburbia, people were lucky if they had a consistent supply of nutritious food. Clearly, this is no longer the case for all but the very poorest regions of the world.

Largely because of the advances brought about during the Industrial Revolutions, wealthier societies could easily produce goods in excess of what the population actually needed. And thus consumerism, which good old trusty Wikipedia defines as “the equation of personal happiness with the consumption and the purchase of material possessions”, was enabled.

Fast-forward to the 21st century, and consumerism has grown into a completely pervasive, self-perpetuating way of life throughout Western society. ‘The equation of personal happiness with material goods’? I don’t think it sounds like a terribly effective way to seek happiness, so why are we so crazy over stuff?

I think our fairly narrow and hollow way of identifying success has something to do with it.

If a guy (let’s call him Paul) has a powerful, high-income job, a big house, a brand new Lexus, and a wife and two kids, we might instinctively label this person a success. We’re conditioned to believe that Paul’s economic standards are a key measure of success, but we aren’t taught anything about happiness. We probably just assume that success = happiness.

What if Paul is absolutely miserable in his situation though? What if his job defies his values, his deep ambitions have long since been shelved, and his work is so overly demanding that his family feels neglected. Still a successful person? Paul knows that he fits the typical American description of one, which makes his unhappiness all the more perplexing and depressing.

To drown out the gaping hole of emptiness inside him, Paul will probably work even harder at the job he doesn’t care about. He’ll make more money, get a temporary high from buying a bigger house, a fancier car, and an upgraded wardrobe, and shower his kids with material support since he never sees them.

All the while, he’s clinging to a belief that if he keeps at it, maybe, just maybe, he’ll find the happiness that has eluded him for so long. Like someone who gets drunk or high to temporarily escape reality, making and spending more money provides people like Paul with a temporary high that must continuously be topped.

We could actually slow down and acknowledge that which gnaws at us from the inside. We could reexamine our values and think about the dreams that once gave us reason to jump out of bed excited. We could reconnect with what we’ve neglected. Or we could take a route that many do, and attempt to drown out part of us that feels discontent by continuing to pursue a consumerist definition of “success”.

Obviously Paul’s case is a extreme one, albeit not all that rare. I’m sure most of us employ similar reasoning at least on occasion; I’m certainly no enlightened Zen master who lives a life of minimalism. I sometimes find myself assuming that I will be generally happier when I have more possessions or the monetary means to acquire them. I pretty much have everything I need right now to be genuinely happy, and I have to remind myself of that. I definitely won’t suppress my wants, but I’m trying to better realize that I shouldn’t associate higher material well-being with more happiness or true success.

The corporate world spends billions upon billions of dollars propagating a way of life similar to that I just described. When the McDonald’s golden arches are more widely recognized around the world than the Christian cross, or when many of our elected leaders are nothing more than middlemen corrupted by lobbyists, you know we’ve granted the corporate world enormous amounts of clout. To ensure that we keep doing so, market researchers invest untold amounts of time and money studying how they can effectively make consumers feel inferior or incomplete without their product or service.

Even from a strictly economic perspective, consumerism is reinforced by many as a quality way to live. Working harder and harder to buy more and more things increases the GDP of our country, which of course is automatically a good thing, right? Just ignore the fact that we probably aren’t any happier than we were 50 years ago, despite our economic “progress.”

Consumerist culture has us striving for someday. “I’ll be happier when I have ____ or I’ll be set if I made just $x,xxx more.” It’s a never-ending, delusional cycle that almost never leads to fulfillment.

There’s much more to say about this topic, and I’ll continue in the next installment of this mini-series. Stay tuned.

There is no Such Thing as Personal Finance

Our individual financial decisions, as personal as they may seem, have global implications.

To operate efficiently and grow, an economy needs consistent sources of capital. Unless we don’t mind hyperinflation, this capital can’t come out of thin air. It must come from savings (primarily from bank deposits, the stock market, and bonds).

Economic growth is achieved when those with growth opportunities who need more capital successfully acquire it from savers. Normally, an economy will rely heavily upon domestic savings for this process. The United States is a glaring exception.

For many, many years now, investment in this country has far exceed our domestic savings. Foreign nations, who have been attracted to the investment opportunities within our borders, have provided us with the means to grow our businesses, consume more goods, and generally improve our economic well-being with a cheap supply of money. This works fine…indefinitely.

We are essentially living on borrowed time; outsiders have been providing us with the ability to live the materially-crazed lives that we have, but that doesn’t mean they will forever. Our party will quickly come to a halt when the bill arrives, and by this time it will be too late to avoid deep economic hardship.

Let’s say that foreign nations decided to stop buying (or even begin to sell off) the massive amount of Treasury debt they hold.  Interest rates would rise as the value of the dollar falls, and our government will be essentially broke with few takers willing to finace more deficit spending. The Fed would probably buy Treasuries to prevent the government from bankrupting, effectively flooding the money supply and wreaking even more havoc on the dollar. It’s not a pretty scenario, but what other result can be expected when you actually consider the madness of our unsustainable ways? We’ve been leading ourselves to the economic grim reaper.

Unless we Americans drastically change our heavily consuming, instant-gratification ways, we are in for a serious wake-up call (even bigger than the financial mess that began to unfold last year). The current state of affairs has many Americans changing their habits, but this needs to be a part of a bigger shift, not just a temporary response to the economic downturn. By living beyond our means, we’re jeopardizing not only our own futures, but the future of our country as a whole, of both current and future generations.

Every dollar that we save in domestic banks, stocks, or bonds is a dollar invested in the future of our nation. Collective change begins with individual change, so we all need to examine our ways as part of a bigger picture. When you forgo some needless little gizmo and save the money instead, you’re making a positive investment in the future.

I know that there is a darn good reason for objecting to my reasoning- what’s the use? Those who do save will only have it robbed by our government to give to the foolish ones who didn’t (including our government itself). We’re seeing this already, and it figures to happen even more in the future. It’s simply an unfortunate fact though. We must lead by example and help convince others to join the fight to create a far more rewarding, sustainable economy that doesn’t borrow (or should I say steal?) against the future.

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