Weekly Insider (Nightmares, Delicate Machines & Strange Zoos; Of Keynes, Darwin & Cato)

Our new issue comes out next week with exclusive sit-downs with iconic

inventor Dean Kamen, ex-McKinsey veteran and innovation luminary Dick

Foster and Lux Research President Matthew Nordan. Their words are

breadcrumbs. Follow the clues...

Today, we'll follow the rational clues of Keynes, Darwin and Cato. And

then next week stay tuned for I will-unable to resist railing against

the foolhardy futility of prioritizing global warming as direr than

cancer, heart disease, AIDS or alzheimers-share two of the most elegant

and persuasive arguments I've heard yet on why curbing carbon isn't

worth the cost.

First some thoughts on time. The more time until a hoped-for-event

occurs, the more chance it won't happen. Or inversely the more chance

the undesired event does. When a target is in your sight, do everything

you can to seize it, for it can quickly flee your scope. Time is the

marshall of Murphy's Law; it paves detours to the undesired; it's a

bedfellow of uncertainty; an inept shepherd of the sought; an agent of

entropy and an enemy of the anxious.

Now for some soothsaying sages who are unusually un-anxious. Following

Warren Buffett's style, Bill Gates released his first annual letter this

week. Buffett passed Gates a quote from John Maynard Keynes on the

current environment. It said this:

"This is a nightmare, which will pass away with the morning. For the

resources of nature and men's devices are just as fertile and productive

as they were. The rate of our progress towards solving the material

problems of life is not less rapid. We are as capable as before of

affording for everyone a high standard of life-high, I mean, compared

with, say, twenty years ago-and will soon learn to afford a standard

higher still. We were not previously deceived. But today we have

involved ourselves in a colossal muddle, having blundered in the control

of a delicate machine, the working of which we do not understand. The

result is that our possibilities of wealth may run to waste for a

time-perhaps for a long time."

Meanwhile, on a similarly delicate machine-the human mind-and the animal

spirits swirling in us social primates which caused the current crisis,

professor Paul Seabright, says "If Darwin had been around to reflect on

the financial crisis, he might have reminded us, in his diffident way,

to think of human beings not as inadequate calculating machines, but as

remarkably well-adapted apes. As group living primates, they are

intensely competitive, alert to the narcissism of tiny differences in

status, navigating their social life through coalition formation.

The way to get ahead is to join powerful groups. The key to social life

is not unfettered competition, nor universal cooperation, but a subtle

mix of the two: competing fiercely to join up with the most attractive

cooperators. And the cognitive capacities they deploy involve a capacity

for strategic reasoning of the second, third, even the fourth degree.

You have to be impressed how well they have adapted to life in the wild.

The problem is that many primates do not adapt well to life in zoos, and

Wall Street is the biggest and strangest zoo of them all. It presents

our large primate brain with vast challenges, of which the greatest has

been solving strategic reasoning of the thousandth degree.

Faced with evidence that a housing boom can't continue forever, we do

not unravel it back to the beginning but try to ride the boom till the

very end, to do just a little better than the very best of the others.

Those differences in status, you see.....Though Darwin's name is often

wrongly associated with admiration for the outcomes of natural

selection, the man who wrote "what a book a devil's chaplain might write

on the clumsy, wasteful, blundering, low, and horribly cruel work of

nature!" would doubtless have been less than surprised at the kinds of

terrible games Homo sapiens gets up to when he spends too much of his

time in the zoo."

One advocate of avoiding the zoo as much as possible has been Vanguard

fund founder and advocate of indexing, John Bogle. John recently said,

"We can't say that we haven't been warned about the perils of ignoring

the past. More than 2,000 years ago, the Roman orator Cato noted that,

'there must be a vast fund of stupidity in human nature, or else men

would not be caught as they are, a thousand times over, by the same

snares . . . while they yet remember their past misfortunes, they go on

to court and encourage the causes to what they were owing, and which

will again produce them.'"

Have a great weekend and enjoy the Super Bowl.

Weekly Insider (Senate, Solar & The World's Greatest Gift)

First: Matthew Nordan, President of Lux Research, gave a captivating testimony on nanotech yesterday in front of the Senate about the National Nanotech Initiative. Quoting Matthew, “The NNI has funded prodigious research in areas ranging from noninvasive cancer therapies to high-efficiency solar panels. But moreover, it’s spurred a renaissance of materials science development in the private sector. U.S. corporations like GE and Motorola spent $2.4 billion on nanotech R&D last year – 23% more than government spending at the federal and state levels combined – and venture capitalists put $632 million into U.S.-based nanotech start-ups, four times the annual figure before the NNI began.”



Second: Take this with a grain of salt. Recent conversations and scuttlebutt revealed that an alarming number of my hedge fund friends are short solar or looking at putting puts on. Of course, they know that markets can stay irrational longer than they can stay solvent, but they are calling the solar boom, “watt-coms” and seeing lots of patterns in common with the dot.com debacle. One CEO of a public solar company apparently told his audience he’d be raising new money every year. When an investor questioned him about dilution, the CEO snapped back: all my investors rent my stock anyway (meaning they were speculators not long-term holders).



From a technology view, let me be clear: solar is Occam's razor—it simply makes sense. But from an investors view, it’s the razor’s edge—good luck. Here's my controversial view: solar will end up as the Global Crossing of energy. Whereas the unintended consequences of biofools, er-biofuels are now being deemed "crimes against humanity"...the unintended consequences of solar will eventually be the exact opposite, what I’ll call "a gift for mankind".



When I say gift: it’s not what you think. Unfortunately the mass of VCs and public market investors flocking like Icarus to the sun will experience how cynically true the wisdom of 17th century French writer Pierre Corneille’s words are: “The manner of giving is worth more than the gift.”



Worth—as in billions of dollars being lost to give it. Startups are already marketing to municipalities and city bureaucrats to buy panels that people and recessionary roofs (corporations) aren't. Here's my prediction: The big winner? Africa.



Solar is to Africa as Global Crossing was to the world a decade ago. The latter helped do a great public good, connecting the world—by laying massive fiber with cheap capital provided on flawed (or fraudulent) assumptions. It was an invisible emerging market tax on speculators—that is: speculators subsidized massive infrastructure buildout. The local people in foreign lands ended up being the real winners. Solar too, at great expense to its private investors is doing a great good for the public. I predict Africa, with low or no baseload power will be the biggest beneficiary.



As William Wordsworth wrote: “Pleasure is spread through the earth; In stray gifts to be claimed by whoever shall find.” Eventually, some years from now, some opportunistic entrepreneur will buy up excess panels and capacity and distribute distressed solar power assets to a distributed population (in Africa). As I’m so found of quoting so often from Jim Surowiecki: in greed and avarice lies the hope of progress.