Dangerous Safety, Safe Danger & Luckily Unlucky or Unluckily Lucky

In wishing you a wonderful holiday season and Happy New Year, I thought I’d give an exceptionally long Forbes/Wolfe Weekly Insider to cap 2008 because I’ll be traveling through the New Year. I wanted to leave you with a potpourri of ponderings followed by some perspective from a commencement speech. I’ll cover risk, unintended consequences and the one thing that cannot ever be taken from you: the power to choose how you act and respond to feelings and situations.

1) On Fast Food Freakonomics

First there’s the Big Mac Index vs. Taco Bell Index. “Burgernomics” or in econo-speak, purchasing power parity—the idea that a dollar should buy you the same amount of stuff in any country. Exchange rates between countries should move so that Big Mac’s cost the same in the U.S. as abroad. This tells you whether a currency is undervalued or overvalued. Now add to this: Chihuahanomics: the measure that there are more Hedge Funds than Taco Bells. But that’s now quickly changing.

Speaking of Chihuahuas. Here’s an exchange between Warren Buffett and Charlie Munger on greed, compensation and corporate boards. Buffett said, “I've been on 19 boards, and I've never seen a director to whom fees were important object to an acquisition or a CEO's compensation—members of compensation committees act like Chihuahuas, not Great Danes or Dobermans.” After a pause, “I hope I'm not insulting any of my friends who are on compensation committees.” Munger quickly replied, “You're insulting the dogs.”

2) On Danger Causing Safety & Safety causing Danger

The zeitgeist is changing at least temporarily—nudged by moral outrage—towards greater accountability, longer-term thinking, better aligned interests and heightened obligations of social responsibility.

Conventional wisdom will say we need more regulation. Maybe, maybe not. The SEC didn’t catch Madoff. I heard rumors from friends that even Elliot Spitzer was an investor with Madoff. So here’s a contrarian view. If you want to make something safer, make it seem more dangerous. Why? Because danger requires attention. Consider: more people get hit in crosswalks then jaywalks. Dangerous is safe and safe is dangerous. Read this passage from a book review of a book about Traffic:

"...Vanderbilt spends much time deconstructing crashes - a problem even before there were cars."In the New York of 1867," he writes, "horses were killing an average of four pedestrians a week (a bit higher than today's rate of traffic fatalities)." Nowadays, the cause of collisions, or one of them, is people believing they're better drivers than they are. We base our judgment on the number of crashes we've been in, rather than on the number of accidents we narrowly avoid, which, if we're being honest (or we're being me), happen just about every time we drive.

Compounding this vehicular hubris is the fact that most of the driving we do appears to be safer than it is. Driving rarely commands 100 percent of our attention, and so we feel comfortable multitasking: talking on the phone, unfolding a map, taking in the Barca-Lounger on the road's shoulder. Vanderbilt cites a statistic that nearly 80 percent of crashes involve drivers not paying attention for up to three seconds.

Thus the places that seem the most dangerous - narrow roads, hairpin turns - are rarely where people mess up. "Most crashes," Vanderbilt writes, "happen on dry roads, on clear, sunny days, to sober drivers."

For this reason, roads that could be straight are often constructed with curves - simply to keep drivers on the ball.

This basic truth - feeling safe kills - lies beneath many of the book's insights. Americans think roundabouts are more dangerous than intersections with traffic lights. Roundabouts require you to adjust your speed, to merge, in short, to pay attention. At an intersection, we simply watch the light. And so we may not notice the red-light runner coming at us or the pedestrian stepping off the curb. A study that followed 24 intersections that had been converted from signals or stop signs to roundabouts showed an almost 90 percent drop in fatal crashes after the change.

For similar reasons, S.U.V.'s are more dangerous than cars. Not just because they're slower to stop and harder to maneuver, but because - by conferring a sense of safety - they invite careless behavior. "The safer cars get," Vanderbilt says, "the more risks drivers choose to take."

(S.U.V. drivers are more likely to not bother with their seat belts, to talk on cellphones, and to not wear seat belts while talking on cellphones.) So it goes for much of the driving universe. More people are killed while crossing in crosswalks than while jaywalking. Drivers pass bicyclists more closely on a road with bike lanes than on one without.

If history is a guide, we will overshoot and overreact with regulation. It’s like going from putting out a wildfire to indiscriminate hosing. In the context of the financial crisis, PIMCO’s Mohamed El-Erian said earlier this year, “In a way, it is similar to how fire brigades respond to house blazes: the immediate task is to inundate the structure rather than be highly selective as to which room to target.”

Here’s Jim Grant quoting Kevin Greenstein of InsideHockey: "With each passing innovation, the players feel as if they are more and more invincible, their armor protecting them from all perceived risk. And the recklessness with which they conduct themselves under that veil of invincibility only makes the sport even more dangerous for the participants...”

Grant also quotes from “Risk” a book by John Adams (not that one). An Amazon description of his key concept of “Risk Compensation” postulates that everyone has a "risk thermostat" and that safety measures that do not affect the setting of the thermostat will be circumvented by behavior that re-establishes the level of risk with which people were originally comfortable. It explains why, for example, motorists drive faster after a bend in the road is straightened. Cultural theory explains risk-taking behavior by the operation of cultural filters. It postulates that behavior is governed by the probable costs and benefits of alternative courses of action which are perceived through filters formed from all the previous incidents and associations in the risk-taker's life.

Grant goes on, "Potential safety benefits tend to get consumed as performance benefits....better sight lines…straightened bends on a windy country road, leads to fewer accidents but on account of people driving faster, more fatal ones...”

Consider Sir Humphry Davy. He invented a lamp for miners to go further than they could have because it burned with a cool flame lower than the ignition point of methane. The result: the amount of coal mined increased—so did the deaths. Why? Because they went into methane-rich environments they wouldn’t have gone before. They felt it was less risky and went in deeper. This is the paradox of safety, and the paradox of efficiency too.

I’ve long ranted about the mistaken belief that by making something more energy efficient we use less energy—when in aggregate, energy use goes up. Likewise, the more efficient we make engineered systems—the riskier they are because they end up having components that are tightly coupled without fail-safes, margin of safety, or room for unexpected error.

3) On Words & Beliefs Matter Part 1

Words matter. Jason Zweig nailed this in Wall Street Journal column earlier this year,

“….Trends in the markets aren't so easily predictable. Yet the vivid words and images that we in the media use to describe the markets make the future seem all the more certain.

“…Psychologist Michael Morris of Columbia Business School has found that seemingly slight changes in how a market rise or fall is described can make a big difference in investors' expectations. When investors looking at a rising price chart are told that an investment “climbed” today, they are about 10 percent more likely to predict that it will go up tomorrow than people who are told that it “increased” by an identical amount. Conversely, someone who sees that a stock “dove” is almost 20 percent more inclined to predict it will drop tomorrow than somebody who is informed that its price “decreased” by the same amount. That's because words like “climbed” and “dove” imply that the market is alive, that it knows what it is doing and that it will keep doing it.

Zweig goes on “…Morris also discovered a striking asymmetry in how commentators describe the market's moves. On up days, pundits and headline writers are much more likely to use words like “climbed,” “jumped” or “rallied” – language full of intention, as if the market were rising by an act of its own willpower. On down days, however, the commentators tend to use words like “fell,” “slipped” or “slid” – language that seems passive, as if the market is not in control of its own destiny. This difference makes you more inclined to expect the market to go in the same direction after a “jump” than after a “fall.” So, despite the abracadabra routine being staged in Washington, the stock market hasn't suddenly become predictable, and the future hasn't become miraculously clear. One of the only certainties is a mushrooming federal debt as the Treasury borrows to fund the bailout of Wall Street's shameful bacchanalia.”

4) On Stephen Colbert & John Stewart on Financial News Coverage

I just loved this joint appearance of Colbert and Stewart on the 24-hour news cycle and the financial coverage.

STEPHEN COLBERT: There's not more news now than there was when we were kids. There's the same amount from when it was just Cronkite. And the easiest way to fill it is to have someone's opinion on it. Then you have an opposite opinion, and then you have a mishmash of fact and opinion, and you leave it the least informed you can possibly be.

STEWART: We've got three financial networks on all day. The bottom falls out of the credit market, and they were all running around. On CNBC I saw a guy talking to eight people in [eight different onscreen] boxes, and they were all like, ''I don't know!'' It'd be like if Hurricane Ike hit, and you put on the Weather Channel, and they were yelling, ''I don't know what the f--- is going on! I'm getting wet and it's windy and I don't know why and it's making me sad! Maybe the president could come down and put up some sort of windscreen?'' By being on 24 hours a day, you begin to not be able to tell what's salient anymore.

The idea that Lehman Brothers doesn't get any money and AIG does reminds me very much of ''Iran is a mortal enemy because they have not achieved a nuclear weapon. But North Korea is a country we can work with, because they have a nuclear weapon.'' The idea is, Get big or go home. How big can you mess up? Can you mess up so bad that you would ruin the world economy? If it's just 15,000 who are out of jobs, no. You have to actually be a global ‘mess-up’ to get any help.

Q: Can anyone break through this mess?

STEWART: I worry that those people are there, but we won't recognize them - or we'll destroy them so thoroughly that their voice won't be heard. I just imagine Lincoln out there, and people throwing the gay stuff at him. ''And what about depression running in his family?''

5) On the Luckily Unlucky & the Unluckily Lucky

I’m fond of three quotes on the perspective of unpredictability and circumstances. First the Bard channeled through Hamlet “for there is nothing either good or bad, but thinking makes it so.” Second, G.K. Chesteron’s “An adventure is only an inconvenience rightly considered. An inconvenience is an adventure wrongly considered.” And the Zen story of the boy and the master who amidst popular sentiment of joy or bereavement over various circumstances befalling the boy repeats “We’ll see”.

During 9/11, a friend lost a friend who hadn't lot his job. Lucky on Monday to not be fired from Cantor Fitzgerald, unlucky on Tuesday when he came to work in the World Trade Center. Those unlucky to lose their jobs on Monday, were lucky a day later to keep their lives.

One ex-Bear Stearns exec, now the global head of equity derivatives and commodities at another bank, said this on the now woeful job market since Bear's sale to JPMorgan, "Who'd have thought we were the luck ones by going down first?"

6) On the power to decide.

And so I leave you with the words of David Foster Wallace, for the power to decide how you feel or how you interpret a situation is yours and yours alone.

Transcription of the 2005 Kenyon Commencement Address - May 21, 2005

(If anybody feels like perspiring [cough], I'd advise you to go ahead, because I'm sure going to. In fact I'm gonna [mumbles while pulling up his gown and taking out a handkerchief from his pocket].) Greetings ["parents"?] and congratulations to Kenyon's graduating class of 2005. There are these two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says "Morning, boys. How's the water?" And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes "What the hell is water?"

This is a standard requirement of US commencement speeches, the deployment of didactic little parable-ish stories. The story ["thing"] turns out to be one of the better, less bullshitty conventions of the genre, but if you're worried that I plan to present myself here as the wise, older fish explaining what water is to you younger fish, please don't be. I am not the wise old fish. The point of the fish story is merely that the most obvious, important realities are often the ones that are hardest to see and talk about. Stated as an English sentence, of course, this is just a banal platitude, but the fact is that in the day to day trenches of adult existence, banal platitudes can have a life or death importance, or so I wish to suggest to you on this dry and lovely morning.

Of course the main requirement of speeches like this is that I'm supposed to talk about your liberal arts education's meaning, to try to explain why the degree you are about to receive has actual human value instead of just a material payoff. So let's talk about the single most pervasive cliché in the commencement speech genre, which is that a liberal arts education is not so much about filling you up with knowledge as it is about quote teaching you how to think. If you're like me as a student, you've never liked hearing this, and you tend to feel a bit insulted by the claim that you needed anybody to teach you how to think, since the fact that you even got admitted to a college this good seems like proof that you already know how to think. But I'm going to posit to you that the liberal arts cliché turns out not to be insulting at all, because the really significant education in thinking that we're supposed to get in a place like this isn't really about the capacity to think, but rather about the choice of what to think about. If your total freedom of choice regarding what to think about seems too obvious to waste time discussing, I'd ask you to think about fish and water, and to bracket for just a few minutes your skepticism about the value of the totally obvious.

Here's another didactic little story. There are these two guys sitting together in a bar in the remote Alaskan wilderness. One of the guys is religious, the other is an atheist, and the two are arguing about the existence of God with that special intensity that comes after about the fourth beer. And the atheist says: "Look, it's not like I don't have actual reasons for not believing in God. It's not like I haven't ever experimented with the whole God and prayer thing. Just last month I got caught away from the camp in that terrible blizzard, and I was totally lost and I couldn't see a thing, and it was fifty below, and so I tried it: I fell to my knees in the snow and cried out 'Oh, God, if there is a God, I'm lost in this blizzard, and I'm gonna die if you don't help me.'" And now, in the bar, the religious guy looks at the atheist all puzzled. "Well then you must believe now," he says, "After all, here you are, alive." The atheist just rolls his eyes. "No, man, all that was a couple Eskimos happened to come wandering by and showed me the way back to camp."

It's easy to run this story through kind of a standard liberal arts analysis: the exact same experience can mean two totally different things to two different people, given those people's two different belief templates and two different ways of constructing meaning from experience. Because we prize tolerance and diversity of belief, nowhere in our liberal arts analysis do we want to claim that one guy's interpretation is true and the other guy's is false or bad. Which is fine, except we also never end up talking about just where these individual templates and beliefs come from. Meaning, where they come from INSIDE the two guys. As if a person's most basic orientation toward the world, and the meaning of his experience were somehow just hard-wired, like height or shoe-size; or automatically absorbed from the culture, like language. As if how we construct meaning was not actually a matter of personal, intentional choice. Plus, there's the whole matter of arrogance. The nonreligious guy is so totally certain in his dismissal of the possibility that the passing Eskimos had anything to do with his prayer for help. True, there are plenty of religious people who seem arrogant and certain of their own interpretations, too. They're probably even more repulsive than atheists, at least to most of us. But religious dogmatists' problem is exactly the same as the story's unbeliever: blind certainty, a close-mindedness that amounts to an imprisonment so total that the prisoner doesn't even know he's locked up.

The point here is that I think this is one part of what teaching me how to think is really supposed to mean. To be just a little less arrogant. To have just a little critical awareness about myself and my certainties. Because a huge percentage of the stuff that I tend to be automatically certain of is, it turns out, totally wrong and deluded. I have learned this the hard way, as I predict you graduates will, too.

Here is just one example of the total wrongness of something I tend to be automatically sure of: everything in my own immediate experience supports my deep belief that I am the absolute center of the universe; the realest, most vivid and important person in existence. We rarely think about this sort of natural, basic self-centeredness because it's so socially repulsive. But it's pretty much the same for all of us. It is our default setting, hard-wired into our boards at birth. Think about it: there is no experience you have had that you are not the absolute center of. The world as you experience it is there in front of YOU or behind YOU, to the left or right of YOU, on YOUR TV or YOUR monitor. And so on. Other people's thoughts and feelings have to be communicated to you somehow, but your own are so immediate, urgent, real.

Please don't worry that I'm getting ready to lecture you about compassion or other-directedness or all the so-called virtues. This is not a matter of virtue. It's a matter of my choosing to do the work of somehow altering or getting free of my natural, hard-wired default setting which is to be deeply and literally self-centered and to see and interpret everything through this lens of self. People who can adjust their natural default setting this way are often described as being "well-adjusted", which I suggest to you is not an accidental term.

Given the triumphant academic setting here, an obvious question is how much of this work of adjusting our default setting involves actual knowledge or intellect. This question gets very tricky. Probably the most dangerous thing about an academic education -- least in my own case -- is that it enables my tendency to over-intellectualize stuff, to get lost in abstract argument inside my head, instead of simply paying attention to what is going on right in front of me, paying attention to what is going on inside me.

As I'm sure you guys know by now, it is extremely difficult to stay alert and attentive, instead of getting hypnotized by the constant monologue inside your own head (may be happening right now). Twenty years after my own graduation, I have come gradually to understand that the liberal arts cliché about teaching you how to think is actually shorthand for a much deeper, more serious idea: learning how to think really means learning how to exercise some control over how and what you think. It means being conscious and aware enough to choose what you pay attention to and to choose how you construct meaning from experience. Because if you cannot exercise this kind of choice in adult life, you will be totally hosed. Think of the old cliché about quote the mind being an excellent servant but a terrible master.

This, like many clichés, so lame and unexciting on the surface, actually expresses a great and terrible truth. It is not the least bit coincidental that adults who commit suicide with firearms almost always shoot themselves in: the head. They shoot the terrible master. And the truth is that most of these suicides are actually dead long before they pull the trigger.

And I submit that this is what the real, no bullshit value of your liberal arts education is supposed to be about: how to keep from going through your comfortable, prosperous, respectable adult life dead, unconscious, a slave to your head and to your natural default setting of being uniquely, completely, imperially alone day in and day out. That may sound like hyperbole, or abstract nonsense. Let's get concrete. The plain fact is that you graduating seniors do not yet have any clue what "day in day out" really means. There happen to be whole, large parts of adult American life that nobody talks about in commencement speeches. One such part involves boredom, routine, and petty frustration. The parents and older folks here will know all too well what I'm talking about.

By way of example, let's say it's an average adult day, and you get up in the morning, go to your challenging, white-collar, college-graduate job, and you work hard for eight or ten hours, and at the end of the day you're tired and somewhat stressed and all you want is to go home and have a good supper and maybe unwind for an hour, and then hit the sack early because, of course, you have to get up the next day and do it all again. But then you remember there's no food at home. You haven't had time to shop this week because of your challenging job, and so now after work you have to get in your car and drive to the supermarket. It's the end of the work day and the traffic is apt to be: very bad. So getting to the store takes way longer than it should, and when you finally get there, the supermarket is very crowded, because of course it's the time of day when all the other people with jobs also try to squeeze in some grocery shopping. And the store is hideously lit and infused with soul-killing muzak or corporate pop and it's pretty much the last place you want to be but you can't just get in and quickly out; you have to wander all over the huge, over-lit store's confusing aisles to find the stuff you want and you have to maneuver your junky cart through all these other tired, hurried people with carts (et cetera, et cetera, cutting stuff out because this is a long ceremony) and eventually you get all your supper supplies, except now it turns out there aren't enough check-out lanes open even though it's the end-of-the-day rush. So the checkout line is incredibly long, which is stupid and infuriating. But you can't take your frustration out on the frantic lady working the register, who is overworked at a job whose daily tedium and meaninglessness surpasses the imagination of any of us here at a prestigious college.

But anyway, you finally get to the checkout line's front, and you pay for your food, and you get told to "Have a nice day" in a voice that is the absolute voice of death. Then you have to take your creepy, flimsy, plastic bags of groceries in your cart with the one crazy wheel that pulls maddeningly to the left, all the way out through the crowded, bumpy, littered parking lot, and then you have to drive all the way home through slow, heavy, SUV-intensive, rush-hour traffic, et cetera et cetera.

Everyone here has done this, of course. But it hasn't yet been part of you graduates' actual life routine, day after week after month after year.

But it will be. And many more dreary, annoying, seemingly meaningless routines besides. But that is not the point. The point is that petty, frustrating crap like this is exactly where the work of choosing is gonna come in. Because the traffic jams and crowded aisles and long checkout lines give me time to think, and if I don't make a conscious decision about how to think and what to pay attention to, I'm gonna be pissed and miserable every time I have to shop. Because my natural default setting is the certainty that situations like this are really all about me. About MY hungriness and MY fatigue and MY desire to just get home, and it's going to seem for all the world like everybody else is just in my way. And who are all these people in my way? And look at how repulsive most of them are, and how stupid and cow-like and dead-eyed and nonhuman they seem in the checkout line, or at how annoying and rude it is that people are talking loudly on cell phones in the middle of the line. And look at how deeply and personally unfair this is.

Or, of course, if I'm in a more socially conscious liberal arts form of my default setting, I can spend time in the end-of-the-day traffic being disgusted about all the huge, stupid, lane-blocking SUV's and Hummers and V-12 pickup trucks, burning their wasteful, selfish, forty-gallon tanks of gas, and I can dwell on the fact that the patriotic or religious bumper-stickers always seem to be on the biggest, most disgustingly selfish vehicles, driven by the ugliest [responding here to loud applause] (this is an example of how NOT to think, though) most disgustingly selfish vehicles, driven by the ugliest, most inconsiderate and aggressive drivers. And I can think about how our children's children will despise us for wasting all the future's fuel, and probably screwing up the climate, and how spoiled and stupid and selfish and disgusting we all are, and how modern consumer society just sucks, and so forth and so on.

You get the idea.

If I choose to think this way in a store and on the freeway, fine. Lots of us do. Except thinking this way tends to be so easy and automatic that it doesn't have to be a choice. It is my natural default setting. It's the automatic way that I experience the boring, frustrating, crowded parts of adult life when I'm operating on the automatic, unconscious belief that I am the center of the world, and that my immediate needs and feelings are what should determine the world's priorities.

The thing is that, of course, there are totally different ways to think about these kinds of situations. In this traffic, all these vehicles stopped and idling in my way, it's not impossible that some of these people in SUV's have been in horrible auto accidents in the past, and now find driving so terrifying that their therapist has all but ordered them to get a huge, heavy SUV so they can feel safe enough to drive. Or that the Hummer that just cut me off is maybe being driven by a father whose little child is hurt or sick in the seat next to him, and he's trying to get this kid to the hospital, and he's in a bigger, more legitimate hurry than I am: it is actually I who am in HIS way.

Or I can choose to force myself to consider the likelihood that everyone else in the supermarket's checkout line is just as bored and frustrated as I am, and that some of these people probably have harder, more tedious and painful lives than I do.

Again, please don't think that I'm giving you moral advice, or that I'm saying you are supposed to think this way, or that anyone expects you to just automatically do it. Because it's hard. It takes will and effort, and if you are like me, some days you won't be able to do it, or you just flat out won't want to.

But most days, if you're aware enough to give yourself a choice, you can choose to look differently at this fat, dead-eyed, over-made-up lady who just screamed at her kid in the checkout line. Maybe she's not usually like this. Maybe she's been up three straight nights holding the hand of a husband who is dying of bone cancer. Or maybe this very lady is the low-wage clerk at the motor vehicle department, who just yesterday helped your spouse resolve a horrific, infuriating, red-tape problem through some small act of bureaucratic kindness. Of course, none of this is likely, but it's also not impossible. It just depends what you what to consider. If you're automatically sure that you know what reality is, and you are operating on your default setting, then you, like me, probably won't consider possibilities that aren't annoying and miserable. But if you really learn how to pay attention, then you will know there are other options. It will actually be within your power to experience a crowded, hot, slow, consumer-hell type situation as not only meaningful, but sacred, on fire with the same force that made the stars: love, fellowship, the mystical oneness of all things deep down.

Not that that mystical stuff is necessarily true. The only thing that's capital-T True is that you get to decide how you're gonna try to see it.

This, I submit, is the freedom of a real education, of learning how to be well-adjusted. You get to consciously decide what has meaning and what doesn't. You get to decide what to worship.

Because here's something else that's weird but true: in the day-to day trenches of adult life, there is actually no such thing as atheism. There is no such thing as not worshipping. Everybody worships. The only choice we get is what to worship. And the compelling reason for maybe choosing some sort of god or spiritual-type thing to worship -- be it JC or Allah, bet it YHWH or the Wiccan Mother Goddess, or the Four Noble Truths, or some inviolable set of ethical principles -- is that pretty much anything else you worship will eat you alive. If you worship money and things, if they are where you tap real meaning in life, then you will never have enough, never feel you have enough. It's the truth. Worship your body and beauty and sexual allure and you will always feel ugly. And when time and age start showing, you will die a million deaths before they finally grieve you. On one level, we all know this stuff already. It's been codified as myths, proverbs, clichés, epigrams, parables; the skeleton of every great story. The whole trick is keeping the truth up front in daily consciousness.

Worship power, you will end up feeling weak and afraid, and you will need ever more power over others to numb you to your own fear. Worship your intellect, being seen as smart, you will end up feeling stupid, a fraud, always on the verge of being found out. But the insidious thing about these forms of worship is not that they're evil or sinful, it's that they're unconscious. They are default settings.

They're the kind of worship you just gradually slip into, day after day, getting more and more selective about what you see and how you measure value without ever being fully aware that that's what you're doing.

And the so-called real world will not discourage you from operating on your default settings, because the so-called real world of men and money and power hums merrily along in a pool of fear and anger and frustration and craving and worship of self. Our own present culture has harnessed these forces in ways that have yielded extraordinary wealth and comfort and personal freedom. The freedom all to be lords of our tiny skull-sized kingdoms, alone at the center of all creation. This kind of freedom has much to recommend it. But of course there are all different kinds of freedom, and the kind that is most precious you will not hear much talk about much in the great outside world of wanting and achieving and [unintelligible -- sounds like "displayal"]. The really important kind of freedom involves attention and awareness and discipline, and being able truly to care about other people and to sacrifice for them over and over in myriad petty, unsexy ways every day.

That is real freedom. That is being educated, and understanding how to think. The alternative is unconsciousness, the default setting, the rat race, the constant gnawing sense of having had, and lost, some infinite thing.

I know that this stuff probably doesn't sound fun and breezy or grandly inspirational the way a commencement speech is supposed to sound. What it is, as far as I can see, is the capital-T Truth, with a whole lot of rhetorical niceties stripped away. You are, of course, free to think of it whatever you wish. But please don't just dismiss it as just some finger-wagging Dr. Laura sermon. None of this stuff is really about morality or religion or dogma or big fancy questions of life after death.

The capital-T Truth is about life BEFORE death.

It is about the real value of a real education, which has almost nothing to do with knowledge, and everything to do with simple awareness; awareness of what is so real and essential, so hidden in plain sight all around us, all the time, that we have to keep reminding ourselves over and over:

"This is water."

"This is water."

It is unimaginably hard to do this, to stay conscious and alive in the adult world day in and day out. Which means yet another grand cliché turns out to be true: your education really IS the job of a lifetime. And it commences: now.

I wish you way more than luck.

Steven Chu: An Exclusive Sit-Down with Obama's New Secretary of Energy

Obama's High-Tech Energy Pick

By Josh Wolfe

Below is an interview after sitting down with Nobel laureate Steven Chu to talk the future of energy and investing. President-elect Obama just nominated him as Secretary of Energy. Here’s his background

Dr. Steven Chu is the director of the Lawrence Berkeley National Laboratory. Additionally, he serves as a professor of physics and professor of molecular and cellular biology at the University of California, Berkeley. Previously, he was at Stanford and Bell Laboratories, where his research included tests of fundamental physics, polymer physics, single molecule biology and the development of methods to trap and cool atoms with laser light. He has become active in the energy space and is co-chairing an InterAcademy Council study, "Transitioning to Sustainable Energy." Chu has received numerous awards, most notably the 1997 Nobel Prize in physics. He received A.B. and B.S. degrees in mathematics and physics from the University of Rochester, a Ph.D. in physics from UC Berkeley and 10 honorary degrees.

Forbes/Wolfe: Energy and environmental issues are the rage, fueled either by rhetoric and emotion or reason and empiricism. How do you see the debates shaping up?

Chu: There's three key things. First, there is an energy dependency issue reshaping worldwide politics. The U.S., for example, spent $250 billion importing fossil fuels in 2005--a significant fraction of the wealth we have in the U.S. While we buy from Canada, others buy from Venezuela, and others from Iraq--it's a commodity. So our foreign policy is highly directed in trying to get guaranteed access to oil.

The other component has to do with security. Zurich, for example, is extremely vulnerable to the gas supplies in Russia. And we in the U.S. are no longer a net exporter of natural gas. So there is sort of an economic competitiveness. As you spend more money on this stuff, everybody wants to keep the cost of energy, electricity and gasoline down. But those costs are low relative to virtually all other countries.

Another component is that those companies that took this issue head-on realized that they could actually become more economically competitive. Wal-Mart decided to spend less on energy and go greener, which will make it more economically competitive. Dow Chemical decreased its energy costs of producing its carbon components that it buys in the forms of natural gas and oil. And it decreased its energy input for producing certain types of plastic by more than 25%. This can save the company hundreds of millions of dollars.

Wolfe: What about the financial players?

Progressive investment houses like Goldman Sachs are beginning to see that the more energy efficient you are, the more competitive you will be. The long-term view is that energy is just going to get more expensive. So these companies are positioning themselves so they can be more competitive.

Wolfe: Even if we make a single device more efficient, the proliferation of new applications found by those devices suck up electricity such that the aggregate amount of energy we use always increases.

Chu: Fair enough. I think there are certain cases where the so called "rebound effect" you are talking about is true. The first pass of remote controls were very inefficient until we started to realize they were gobbling up tens of milliwatts, and now there are laws being passed in California because these were so called "vampire" devices which sucked lots of energy.

Refrigerators are now 4.5 times more efficient than they were in the 1970s! And even though the refrigerator itself went from an average size of 18 cubic feet to 22 cubic feet, the inflation adjustment price went down by a factor of two.

Wolfe: But what do the figures look like when you analyze the total aggregate energy used then versus now?

Chu: It depends on which state. In California, it's been flat. From 1975 to 2005, it's within 10% per person what we've been using for electricity. The rest of the United States went up by about 60%. Now that's another myth that people propagate. If you are going to become more energy efficient, you need to compare energy use to GDP, and in the years 1975 to 2005, the GDP in California went up by 90%--1.9 times higher GDP. It's because of appliance and efficiency standards that we've been able to keep our energy usage relatively flat, and considering California is on average a warmer state, that's pretty amazing.

Wolfe: OK, now let's turn to the environment.

Chu: The carbon in cleaning up the environment weighs very heavily on my mind. The earth is warming up faster than we thought, and the ice caps are melting faster than we thought. The world average for glacier melt is 1.2 meters per year, but in Greenland it's much faster. Most of the people in the world climate community think there is about a degree of warming left if we turned everything off now.

But there is a big push to keep it below two degrees. If you go higher than that, there are other tipping points, especially the release of carbon in the tundra and the things frozen in the tundra region, and that tipping point means it becomes very nonlinear and all of a sudden--boom!--there is a big hit of CO2 that is caused by the climate warming. That would mean a very high probability of all of Greenland melting. If that were to happen, Bangladesh would be gone, New Orleans gone, and probably part of Florida. This would not be good.

Wolfe: There's a myriad of solar approaches from thin-film to nanostructured. What's the key breakthrough we need?

Chu: We need a factor of two or three times better, and you'll see every box top warehouse putting it on their roofs. That kind of efficiency approaching $1/watt will make it happen. On hot summer days, you'll charge a lot for electricity, which makes sense for utility companies because everything boils down to return on money invested. If we get a factor for three to four times improvement in efficiency and cost per watt, then homes will adopt solar rapidly, as it will start paying for itself in less than 10 years.

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Wolfe: What are the odds we see a breakthrough this year or next?

Chu: Pretty low, maybe 1%. But a lot of smart people and a lot of money are going into this.

Wolfe: What about the impact of nanotech?

Chu: That's really heavy in our program, and that's because we're very good at it. You can rewrite the book of what's possible in terms of materials capturing photons and turning them into electrons and getting them into electrodes. The scale is so thin, literally 100 nanometers' worth of material. If we can make silicon a few microns thick, which is all you need because of new light-trapping techniques, the price will plunge.

So you get thin-film silicon technology or nano thin-films with spincast or wet processing techniques, and the scalability becomes very promising. Right now, it requires very high temperature, you need to refine with batch processing like baking cookies. But what you want is a continuous process. And that will drive down large-scale manufacturing costs.

Wolfe: I agree. I coined a word, "simplexity," to put manufacturing complexity into simple chemistry.

Chu: That's what we're trying to do. I recently visited Applied Materials, which started out just on integrated circuits but now makes thin-films for infrared coatings on windows. It's still very complex, with a sputtering vapor deposition process. And nearly all of our work here in photovoltaics is on new applications of nanotechnology. And as you look at emerging approaches like using biology to assemble or pattern nanostructures, because this area is moving so rapidly, the probability of having a big breakthrough is much higher than just trying to get silicon on a thin-film, because that's already been around for 60 or 70 years.

Wolfe: What is the focus of the new BP-sponsored $500 million institute?

Chu: UC Berkeley and Berkeley Labs, the idea here is that it's mostly on traditional route, grow biomass and extract energy. The important issue is, Can you develop better feedstock and avoid nitrate runoffs and water supply issues, and make the crops drought-resistant and make unproductive land be more productive and so on? The other side is, How do you take these long chains of polymer sugars and separate out the lignin from them? The lignin is actually a high-value compound, but you have to get it away from the sugars. Right now, we use hot acids, steam explosions. We want less energy intensive, and ultimately microbes that could break it down naturally.

Wolfe: What areas should we be focusing on?

Chu: Energy will become increasingly high-tech, generation and use. High-tech companies spend 10% to 15% of revenue of R&D, right? Well 10% to 15% of $2 trillion, which is what we spend on energy, is a lot of money. It's $200 billion. I'd be happy if we spent 1%, $20 billion. At $20 billion you go into nanotech solar, wind doesn't need more research; you just need mechanism for long-distance transmission lines. Capital should also be directed to power engineering, things like DC conversion and transmission technologies. There are longer-term things like fusion or nuclear fuel recycling, carbon sequestration--especially after combustion in coal plants.

Wolfe: What advice would you have for a young scientist?

Chu: Work on something you're passionate about. The likelihood of getting rich or a Nobel Prize is small. The single most important problem science and technology has to solve is this energy issue. Getting carbon-neutral energy in a cost-effective way, it's really scary.