Have a look at the ‘debt clock’ http://www.usadebtclock.com/ and you will see the dial spinning at over 2 million dollars a minute. Real dramatic.
This made some folks jumpy during this most recent election season and it took up at least 50% of the oxygen. And still does. Let’s pick this issue apart. OK, first my credentials. None, but hey, my ideas are at least as good as the collective opinions about this issue because, like noise canceling headphones, there is so much disagreement that there seems to be no single set of facts. Just relentless buzzing. (See Alan Greenspan the ex-head of the Fed who told Congress in 2011 that after 40 years he didn’t know what he was talking about) Well, I want to take your worry about the debt away and replace it with a bigger worry.
First, the debt is often compared to the GDP as if that comparison had any relevance. (Look! 50 SUVs are the weight of a grey whale!) As we shall see the debt can be compared to something but it isn’t the GDP.
A government’s purpose in a free society is to make a reasonably safe environment for us to live our lives. We come together and forge an agreement to operate with a set of rules. Then we spend the rest of the country’s existence fine tuning the agreement.
Some folks in this country are always trying to figure out what the Founding Fathers had in mind. Ha-larious. Why do we care what these folks from another age might feel today? (I think they are so beloved by some people because they carried guns) Some say we have a pact with them. We don’t. We have a pact with the Constitution. Big difference.
One job of our government is to raise money and manage some of the social systems like providing for the common defense, running a post office, conducting a census and so on. The Constitution was immediately seen as incomplete so we amended it before the ink dried and have been doing so ever since (the Supreme Court rulings have the force of the Constitution). Nearly all of us agree that the government should manage a lot of activities. One thing it is charged to run is a treasury system and with that comes the ability to create debt and print money. Cool, free money!
So the national debt is 16ish trillion (and lots of state and local debt too). (In pennies the weight of 17.5 million grey whales, big ones.) People are heard to say you can’t live beyond your means at home so how can a government? If you go overdrawn you will go bankrupt they say. True, but the federal government isn’t a household on steroids. It can print money, go to war, make some pretty amazing rules – all things you can’t do at home. If we inflate the money supply we can reduce the debt. I’m not suggesting doing this because, as I contend, the size of the debt doesn’t matter anyway.
Some say we can reduce the debt by creating millions of new high paying jobs. If we buy more stuff we will grow our way to prosperity. Even Robert Reich an avowed lefty at UC Berkeley says this. But from where I sit it seems as demand grows the things are shipped in from shored long ago. What about the balance of payment to other countries and a weaker dollar? Well we are actually expecting oil independence and even export soon. Really, that’s what they say.
Why do I say worrying about the debt shouldn’t keep you up? Because the debt is merely a bookkeeping tool whereby one party borrows money and another party is paid interest. Why borrow money? Ideally one borrows to have access to the utility value of something like moving into a house decades before it’s paid for. It is also used to fill in gaps in the ratio between revenue and the actual cost of things. Last year the insane argument about not raising the debt ceiling might have made sense except it was used to pay outstanding bills, not for new work.
There was also a lot of noise about China holding our debt like a parent who might withhold your allowance. Well, they already hold the debt and it can’t be ‘called.’ (They actually only have 8%.) The mechanism is – we send them money and after the kleptocrats skim off about half they build things like factories to make more stuff. We then buy that stuff and send them yet more money. (Talk about a tool to promote world peace!) 4 trillion of the debt is owed to the Federal Reserve and 2 or so to Social Security. Now I’m no economist but doesn’t that mean we owe much of it to ourselves?
It looks like we will continue to borrow money to pay ourselves the interest on borrowed money but eventually even a hall of mirrors fades away and this magic well will run dry. The result will be to write the debt off as a bad loan and our credit will go down the drain. What will happen then? We will be forced to live within our means which is what everyone has been clamoring for. People say, oh, we will become Greece. Austerity! Yes indeed. Or maybe we call it sustainability.
“We can’t have a dystopian future – we need our comforts!” yell the consumers. Well the future is here. This $4,000 chair promises to make you happy. All 300 pounds of it which is what the average American will soon weigh. Sure looks like the chair from Wall-e.
So if I say the size of the debt is of little relevance and a comparison to the GDP isn’t effective, what is? We now actually have a use for the whales and SUVs. We have to compare the debt to all the stuff.
The functional debt on a car, a freeway, a whale or anything that exists is zero according to the universal law we call reality. This means that if it exists and is useful the universe doesn’t care if there is paper debt against it because it is actually here. If there happens to be a paper debt applied to it that is a characteristic like a tree casting a shadow, but it is of no consequence to the thing itself.
The ‘stuff’ exists so the universe says it is completely paid for. I’m talking about both simple things like an apple and complex systems like weather. Let’s start adding up the utility value of everything and for simplicity sake let’s use just planet Earth and divide by the USA.
We have to add all the cropland, sure, and all hose Beanie Babies but we also have the infrastructure like the dams and waterways, uniform weights and measures, and less intangible things like the protocol of driving on the right.
So what’s it all worth? Digging around on Wikipedia gives a value of the Earth (for insurance purposes no doubt) of 42 quintillion (18 zeros) US dollars. So if the America controls, say 25% of the world’s value then our share is about $10 quintillion. This makes the national debt about a millionth of the value of all our stuff in just the US and that isn’t counting the sunshine. At this point most of the readers will assume I’m kidding but I am quite serious. I know the 18 zeros is a made-up number isn’t the real value actually far higher. In fact, priceless.
Clearly if we raise the national debt it will have little impact on the ratio. What will wreck the formula is to devalue the stuff. We all know by heart the list of how this might happen. Asteroid, check. GMOs, check. Nuclear war, check. Pestilence, check. These things might happen but probably not. What about global warming? Were you watching NYC and New Jersey becoming a surfer’s paradise? Oh, it’s happening. The big storm cost tens of billions sure, but make New York City uninhabitable below the third floor and watch the value of these places decline rather more.
By this point some are agreeing. Others are disagreeing and thinking I’m taking a leftist position. Well if reality is tilted to the left I guess that’s true but really it need not be partisan issue. Am I so pure and above the fray? No, not at all. I’m gobbling resources with everyone else even while trying to cut back.
So maybe I’m all wet but this is a country where (according to the National Science Foundation 2011) 32% of Americans believe in magic numbers so I hope to appeal at least to these folks.
I guess this all sounds pretty nuts. Maybe I’ll get one of these chairs after all.
The walls at Buck’s are covered with art and technology from an earlier age of adventure and discovery, but much of the real action in science and technology has now moved to an atomic and molecular level. My friend Aymeric Sallin leads a Venture fund called NanoDimension (anchored in Zurich and Menlo Park) and deals with all sorts of nano-sized technologies. This technology involves tiny elements harnessed to big projects. Aymeric chose this industry to focus on because, as a physicist, he gets it. He supports companies as they move atomic processes from lab to fab.
Here in the Valley many new firms focus on software; NanoDimension backs businesses that make stuff out of atoms. Their latest project, View Inc., involves the slight movement of an ion on the molecular level which changes glass from clear to variable tint. This infinitesimal realignment now is poised to disrupt an entire industry.
We all lament the disappearance of American manufacturing jobs to other countries. By backing View Inc. a consortium of VCs, including NanoDimension, has created hundreds of jobs in the USA and will soon add hundreds more. I was privileged to have an inside look at this remarkable technology while it was still in stealth mode.
The folks at View have built a plant in Mississippi to manufacture dynamic window glass. Office buildings, hospitals, restaurants, homes and countless other buildings are wrapped in glass. Take a multi-story office, the kind you see throughout Silicon Valley and you will (I will never see them the same way again) notice that nearly all the blinds are half or all the way down. Funny, you finally work your way up to the edge of the building, a corner office even, and then immediately pull the blinds down so you can see your screen. And down they will stay.
View manufactures glass that can be dimmed automatically in bright sunlight or controlled directly by the user. When combined with dimmable lighting and tight zone control of the temperature you can create an ideal environment and still see out the windows. Dimming the glass also keeps direct sunlight out thereby reducing the AC load, a big factor for modern buildings. On energy savings alone this product pays its way. But the real benefit isn’t about money but about the human experience. We have a deep primal need
to scan the horizon. It has been well documented that a view makes people happier, more productive and in hospitals, speeds patient recovery.
But hasn’t this glass been around for a long time? Yes, 40 years and its inventor is an emeritus advisor to View. But dimmable glass has never been available on a commercial scale. To learn how to manufacture this at scale
–> To learn how to manufacture this at scale Dr. Rao Mulpuri and his team worked with Seagate and repurposed a disc manufacturing facility in Milpitas – it was an efficient and cost effective move and represents a re-purposing so indicative of Silicon Valley. In the glass industry, the acquisition of this plant is on a par with Elon’s score of the Ford plant for Tesla in Fremont.
The View team managed to recycle it for their R and D facility where they perfected the technology before building their fabrication plant in Mississippi. Mississippi was so excited to see them show up that they all went gigging for gators and attracted them with huge incentives and support. From this plant they will supply not only North America but Europe as well, where the energy conservation requirements for buildings are far more stringent.
The technology required to manufacture a double pane, dimmable window that can be up to 5×10 feet is daunting. But making it is just part of the equation. With this sort of product you can’t trickle into the market for testing. It’s more like building a bridge. In other words you can’t even sell your first window until you put the entire organization together with a capacity to produce huge quantities of the product.
Recently the first twelve windows were installed in the lounge of the W Hotel in San Francisco and in a very real sense each window cost tens of millions.
View and its VC backers have spent years helping move this disruptive new product into an untested market in dicey times. These people have guts. Silicon Valley style all the way. Viewglass.com
LOCAL WORLD CHAMPION WILL MILNE
Who’s the best saber swordsman in the world between 50 and 59 years of age? My cousin – Will Milne! That’s right, he just returned from Austria where he won the gold medal in the Veteran World Championship.
Modern fencing, also known as Olympic fencing (to distinguish it fromhistorical fencing) is divided into three sports depending on the weapon; foil, epee or saber. Foil and epee are all about poking the other guy with the tip of the blade in order to score a point. The tip of the blade has a button switch on it so when your opponent gets “stabbed” you score a point. No poke, no point. Saber is different. With saber you can hit with any part of the blade and a light comes on. Saber is all about slashing, cutting, lunging and attacking. Like a free-for-all with car antennas. All this takes place in a couple of seconds.
Will has been saber fencing for about 10 years. By most measures he is a hobbyist in that he hasn’t been at it his whole life, unlike some of the fencers that he conquered at this year’s Veteran World Championship. So what kind of tournament is this? Well, the last US person to win the tournament was Ed Korfanty in 2006. Ed is the current saber coach for the Women’s US Olympic Team. Remember the US flag bearer in London, Mariel Zagunis? She was the one with the big smile, the woman who won gold in Athens and Bejing? She’s one of Ed’s students.
This is Will’s second year on the US Veteran National Team. Two years ago the tournament was held in Croatia and he came back a disappointing tenth place, a real letdown. He says he lost to a screaming Italian with an entourage who were cheering and waving towels and generally being Italian. His excuse for losing? “I panicked”. Not this year when he brought back a gold medal so large it came home in the hold. Will says one critical difference this year was that US Fencing Association sent along a coach for the athletes, none other than Vladimir Nazlymov. What, you don’t know the name? Well, he fenced for the Soviets in four Olympics, winning six medals (three of them gold) won ten world championships, was coach of the Soviet Olympic team and then immigrated tothe States where he became coach of the US team. Oh, him. Says Will, “I wouldn’t have won without Vladimir. It’s a lot easier to stay calm with a coach like him on your side.”
When I asked Will how it felt to win, he amazed me with his perspective. He said that when you win you don’t have to tell a story about how you nearly won, how the guy who beat you was a ten times winner of this or that, or how, if not for a loose floorboard or any of a million other reasons, you would have won. When I asked him how it went in Austria he said simply – “I won.” Winning needs no clarification. He said the best part was standing on the top of the podium with the silver and bronze medalists below him as they played The Star Spangled Banner. Nothing like rubbing it in.
Not that all this has been easy. A few years ago Will took a blade through the hand, and not a slight cut either. It cut his extensor tendon. He lost some function in his sword hand, yet even with this he is the current world champion. How is such a thing possible? Will says much of it is about controlling stress. If you can be the one swordsman in the room who isn’t panicked and spinning out mentally, you’ve got the edge.
This might seem like a mildly interesting recreational pastime except that Will brings this same sense of calm to his profession. Will is a homebuilder – Milne Design and Build. This is a field fraught with tension. Homes in our area are custom made productions not unlike motion pictures. There are good ones and less good ones but nearly always they are really stressful to produce. I know this because I used to be in the business, homes, not movies. Back in 1979 when Will was a teenager he worked for me as an apprentice on Steve Jobs’ house. This is pretty funny as it was only my second job ever and I was a pretty green builder. I was certainly in no position to teach much, having just arrived on the scene myself.
Will is far better at his craft than I ever was. He knows what he’s doing, sure, but the real reason his projects run so smoothly is that he’s always calm. I was on one of his job sites in Woodside a few years ago on the last day of construction and even though there were dozens of people everywhere, and the client too, he took it all in stride. Will specializes in fine residences in Atherton, Menlo Park and Woodside. One of his projects is under construction two doors north of Buck’s on Canada Rd.
I asked him about similarities between fencing and building and he said that in most respects they’re very different. Building is collaborative and takes lots of time and patience with input from numerous sources. Fencing is fast, instinctive and individual. Primal. Hit or be hit. And the best way to hit rather than get hit? Don’t panic. I do see a lot of parallels though. On his jobs nobody panics.
Next year Will is going back to Europe and the rumor is the tournament is somewhere in Bulgaria on the Black Sea. He’ll be defending his title against the Russians and Bulgarians, the French and the Germans, and yes, the screaming Italians. Will he slash and cut his way to the top a second time? We shall see.