The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick
“There is no doubt that innovation and change are necessary in these areas of the economy, of energy and the environment, and I do think that managing our expectations, as Chris suggested, is a very, very important thing. It is, what kind of life do you want to lead now, and in the future? And you need to be very intentional about organizing your resources to achieve those goals.”
– David McAlvany
Kevin: Before we go to our guest, Dr. Chris Martenson, and I just wanted to mention, when we first read his book, The Crash Course, I’ll tell you what – it was a scary book. Dr. Martenson knows math, but he knows the kind of math that shows you ahead into the future where you are going. And it is critical, when you are looking at something like this, whether it is oil usage, whether it is food, whether it is population, to put that into perspective. And what I like about Chris Martenson is this. First he scares you, and then he gives you simple, practical steps that you can take. And as I read his book, Dave, Prosper, a lot of it was just common sense. It almost sounded like the things that you have been talking to people about doing for years.
David: Yes, just to give you an example, this notion that he develops of “cry once.” When you buy something it may hurt to have bought the highest quality, and it may cost you more to do so – the luggage that I travel with, Briggs and Riley, is far more expensive and it has a lifetime guarantee. There is no other luggage manufacturer that offers a lifetime guarantee and I have used it, and my father has used it, and you pay dearly when you buy it, and it lasts, and you have an implicit guarantee. “Cry once,” again, it is common sense, but yes, you should think about that in terms of the things that you have or the way that you allocate resources. You can buy something ten times over, or just once. That’s just a minor example.
Kevin: And Dave, I personally benefitted from that minor example because over the 28 years I have known you, you have watched me wear out bag after bag after bag. And finally, just recently, as a gift, and thank you very much, you cried and bought Briggs and Riley for me, and that bag just doesn’t wear out.
David: (laughs) I think one of the things that Chris Martenson and Adam Taggart highlight in their book Prosper is that they suggest that there is something to thriving which is beyond having a bunch of money. And that is a change in narrative. That is a change in storytelling across our culture. And it gets to something that I think you and I would certainly hold to, perhaps with a few other dimensions developed differently, but the nature of thriving – yes, it is possible to thrive regardless of circumstances. It doesn’t matter what your life circumstances are.
Kevin: It’s your reaction.
David: It is you reaction. And it is your mindset. It is what goes on internally which defines how you thrive regardless of the circumstances. So the book does a great job, I think, in laying out the potential scenarios that are there which we need to be cognizant of, based on these exponential growth rates. And how will we adapt and thrive? So they have chosen, I think, an appropriate title, Prosper.
Kevin: I am reminded of Churchill’s saying that it is not how many times you fail, but how many times you get up after you fail. And that is really what resilience is.
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David: Chris, this is the second opportunity we have had to read your thoughts and see how you distill information and data. Of course, your first book, The Crash Course, we discussed a couple of years ago, and had you on the program to talk about that, and very insightful in terms of a change on the horizon, and it seems to me that this next iteration, a variation on a similar theme, is to move toward some practical conclusions. If there is change on the horizon, then what is an individual inclined to do? What should they do? What actions should they take? And so, you start with a definition of resilience which I really like with an emphasis on thriving in the present. Maybe you can tell us about that.
Chris: Certainly. David, once somebody reads The Crash Course, or comes across your work, or anybody else out there who bothers to add numbers up and sees how unsustainable our economy is, they usually get to this question of, “Well, now what? What should I do?” And quite often it comes with a lot of fear, a lot of anxiety. So, what Adam Taggart and I have been doing for years, ever since the launch of The Crash Course, is working with seminars, with individuals, with people who come to our website to answer that question of what should I do?
And really, the word that pops up again and again is to become resilient. Resilience really means the ability to spring back from an insult, to weather a storm, to really be truly diversified in a way that allows you to have multiple redundant things that you can fall back on. And so, we might, if we were talking with a business, describe that we think that resilience is having a slightly deeper inventory in a time when we are not totally clear about what might happen to the supply chain.
For an individual, maybe you are more resilient if you have a deep pantry in your house, not knowing what sort of natural or man-made interruptions might happen to the food supply. We talk about things that many people will immediately start to sense, “Oh, that’s like what a prepper might do.” But really, it’s not at all – the foundation of our book is nothing about doing things out of fear, and we really spend a lot of time talking about how the sorts of things we can do today in our lives that would prepare us, potentially, for an uncertain future, some of which might be disruptive. It also is a huge addition to our quality of life, our joy, our happiness, our health, today, and that is really what Prosper is about.
David: Chris, we moved to Durango, Colorado in 1992 from Denver. Denver was a good place to grow up and a good place for our business for the 20-odd years that we were there, but my father had the insight to say, “I’d like to be in a smaller town and I think our quality of life could be improved if we were in a place where the natural activities of the area were all physical. The people love to hunt and fish and rock climb and mountain bike and go back-packing. And these are things that are quality of life issues and it did come as a result of living in the mountains as opposed to living in Denver.
So, some of these things are things that we have been thinking about and doing for some time, and can look back over the last 20 years and say, “I am so grateful we put some things in motion then that, quite frankly, were disruptive, to some degree. You have to plan a major trip to the mall down in Albuquerque, which is 3½ hours away, if you are going to be doing any serious Christmas shopping. Of course, you point out in your book, actually, that is not really the case now – it was in 1992 – but now that happy brown truck, UPS, is just a mouse click away. Anything can be delivered to your doorstep at this point.
Chris: Absolutely, that is right. I was talking with somebody, I was at a major wealth conference – there were billions and billions under management in the room – and this topic came up and I started describing some of the changes that my family had made. We moved to a more rural location. I have a garden, I’ve got chickens, I’ve got an orchard. Everything that is in this book are things that either I have done or my business partner, Adam Taggart, has done. So, we are walking the talk.
And this guy heard a few things and was like, “Oh, you’re one of those crazy prepper guys, I guess.” Because that is where people in this country immediately default to, there is no middle ground. So, thankfully, I’ve got a Smartphone, I whip it out and I show him a picture of my garden taken in August, and it is just a beautiful, beautiful thing. We have lavender and sunflowers and corn and all these vegetables. And I said, “Look, this was part of my response, but I’m not doing this to live in fear in a darkened bunker somewhere. I live an extraordinarily high quality of life. I sleep really well, I’m healthier than I used to be, and I surrounded myself with beauty.” That registered for this gentleman because he lived in New York City and I think there are not a lot of nods to beauty being undertaken architecturally, at least externally, in that city. It is just an afterthought if it ever happens.
And so, really, these big changes are a blessing and a curse. The curse is, “Oh, it might be disruptive.” The blessing is that I think it gives us the opportunity to step back and say, “Hey, hold on. How do I actually want to live my life? What do I want to take charge of?” And your story, very uplifting, that your father and yourself made the decision – “Let’s move to a place where our lives will be supported by the world around us,” whether that is fishing, hiking, all the outdoor things that add something high-quality to your life.
That’s really the invitation in this book is to say, “Hey, here are all the warning signs. Wouldn’t now be a great time to step back and ask yourself how you like to really build capital? And not just financial capital, but there are eight different forms of capital that we use in the book as a means of helping people structure their thinking for how they might want to go about really building true prosperity into their lives, really being diversified, and bringing the quality of their life up today.
David: That really resonates with me, this idea of an expanded view of a personal balance sheet, where your assets are not just what you might find on deposit at the local bank, brokerage firm, or what have you. You positioned your book with a stated mission of creating a world worth inheriting. And I like that. I think it resonates, particularly with the younger generation that is unsure of the value of punching the clock for 45 years, devoid of greater purpose.
And you weave in this greater purpose with the simplicity of, it’s nice walking up to something that is beautiful and peaceful. And there is almost a finding satisfaction in other things, which again, goes back to that issue of what do you value? And what do you put on your personal balance sheet? Maybe you can expand that for us a little bit, talking about those eight areas of capital.
Chris: I’d love to. And I think the way you have framed it is correct, that a lot of younger people, sometimes called Millennials, collectively, but I just think of anybody under the age of 30 at this point. In my work I detect often that these people are very unhappy with the American dream, they don’t buy into the concepts that were sold to me and that I lived in too faithfully. They see the world around them, really, falling apart in key ways. I don’t know how you can think otherwise when you see species going extent, or water issues, or soil washing into the sea – other really big things. So this book, I think, is resonating with all sorts of different ages of people, but especially, also, younger people, because it says exactly what you have said which is that our personal balance sheet has to consist of more than money.
One of the forms of capital is financial. We spend a big, fat chapter on that, we talk about it, but we really say, “Listen, get your spending – really understand what it is – get it under control, have a balance sheet, have a cash flow statement. Understand your income stream, diversify.” Then we go through all that usual stuff. And then we say, “Great. Take a portion of that. Some number – 10%, 20% – and dedicate it to other forms of capital.” We talked about one already.
Another form of capital is living capital. And that is all the systems that support us. I mentioned a garden and an orchard. I personally take money and I put it into building the living capital on my property. If I didn’t have property I would spend my money supporting local farmers who are farming in a way that supports increasing soil depth and diversity, that they are planting in ways that require less of the intrusive poisonous ways that industrial farming has come forward with.
But as well, our living capital is our bodies, so we could invest money in a gym program, a Crossfit membership, getting the kind of functional medicine, detailed fingerprinting that we can get with blood work to tell us what we could do to personally tune our bodies up. So, that’s just one example where if you don’t have your health, you really don’t have anything at all. So, we advise, think about living capital as a form of capital that you can trade some of your money for once you decide to make that a priority.
Another example would be material capital. I have great investments people can look at if they own a home in terms of insulating, putting in solar thermal to get hot water, with very high returns on investment – double digit, sometimes even triple digit, depending on the state of your house and your energy systems. So, we’re trying to help, in that example, to have people reclaim this idea of investing, away from the old model of, you earn money and you store it and you send to Wall Street and hope for the best, and starting to bring that investing back into your own personal world into things you understand, things you can control, things that you totally are able to manage and oversee from soup to nuts.
Not easy doing that kind of investing. It is not as easy as pressing the mouse button and owning a hundred shares of something in half a second. But it is much more rewarding, much more worthwhile, and actually gives you true diversification of your income streams and your social capital, as well, as you form the relationships necessary to be investing in that way and social capital is, of course, another form that we talk about.
David: One of my favorites was the area where you describe knowledge, and knowledge as a form of capital. You take it one step further to say, this is not just books that you read, or information and data that you acquire, but it is actually being able to take that and transform it into a working knowledge, a skill set. So, a synthesis of ideas of ideas and what you do with those ideas, which is, I think, very compelling, because I don’t know that the encyclopedic approach to learning, what you have stuffed between your ears, is sufficient. That is really not where wisdom comes from. The application of knowledge, perspicacity, the application of wisdom, taking that one step further. I think you did a great job describing knowledge as a form of capital.
Chris: Indeed, it is a very important one, and there is an opportunity in there to really discuss what college has become for a lot of people, and college really focuses, I think, in many cases, in certain specialties, only on the intellectual learning process, and it doesn’t have the experiential part. That is starting to break down, more people are starting to get it, but wisdom comes from making a lot of mistakes, and that comes from experience, and that comes from doing, so for us, what you know and what you do, you overlap between those two circles – that’s mastery. So sometimes people focus on just one part, “Hey, what skills should I learn to face this new future?” And other people think, “Wait a minute, what new information should I gather?” Those are both important processes. We want to see those overlap a little bit more, and invite people to consider really getting the appropriate understanding, the framing. I think that is the work that I am principally in, and that you are in, is helping people understand, really, the context of the world that we are in, economically where it is going, historically what is happening. That is all wonderful, but that information without the appropriate action is just interesting. When you get the actions that associate with that where people take that knowledge, convert that into real experience, making mistakes, which is totally fine, then magic happens. And so that really feeds into one of the stronger recommendations that Adam and I make, and one that I am putting into practice with my own children who are 21, 17, and 15. I am encouraging them to skip college if that is appropriate, and to get into entrepreneurship, to really learn how to practically apply yourself so that you can find the value you can put into any circumstance. And if they come forward and say, “Dad, that means I need a stem degree, Science Technology, Engineering, Math – I really need that.” That will be fine, but otherwise, I truly think that the future belongs to entrepreneurs, and my definition of entrepreneur is somebody who knows how to add value at any moment in time, whether we are using dollars, yen, euros, gold, bread – it doesn’t matter what is happening at that time. Really, entrepreneurship is critical right now.
David: And I want to come back to the other forms of capital – time, culture, and emotional, those categories. But it seems like an idea that you reference is apropos here, this Japanese concept of Kaizen, where you practice and continue to improve. One of the things that my family did maybe two years ago is we watched and discussed a movie called Jiro Dreams of Sushi. It is about this man who wants to master Sushi. And he is the only top Michelin start Sushi restaurant located in the bowels of the Japanese underground system. He is in the subway system. This is not a five-star restaurant, it is more of a diner. But this is a man who spent his years, as you describe, from an entrepreneurial standpoint, willing to take risks, willing to perfect something, and willing to acknowledge that, to some degree, every success includes a failure because he knows that he can continue to improve on it, and he is open to that and he wants to make it better and better and better and better.
So, the whole process that you are describing in terms of creating resilience and developing these areas of capital, I think to acknowledge that there is an acceptable degree of failure, and in fact, as you say, and I think you would encourage your children to also, your first success may be your worst success. Actually, wisdom does come, as you said, from experience and picking yourself back up off the floor over and over again. That’s where wisdom comes from. So, if you haven’t seen that movie, it is absolutely fabulous and I think gives a perfect setting for the idea of entrepreneurship and constantly making things better as you go.
Chris: I have heard about it. I haven’t watched it. I will move it right to the top of my list, even just because of one sentence you said in there, that every success has a failure in it, and that is exactly something that we spend a good amount of time on, particularly in people who have come through a standard public education system because our system does a really good job reinforcing over and over again, over years, and even decades if you are in school long enough, that mistakes are not okay, that they are punished, that you get a lower grade. And in truth, all entrepreneurship is about learning from your mistakes as quickly as possible.
So for somebody who is afraid of making mistakes because they have been trained from an early age that they are not okay, it is going to be a real impediment to their entrepreneurial spirit, because they won’t take the appropriate risks, or they won’t learn from their mistakes because they will be so traumatized by them, or however you want to look at that. So, again, we do need to reframe a lot of things in our lives, and that idea that failures are somehow wrong or bad is something that really has to be addressed. So we do spend some time on that.
And I don’t know how to say this to an audience without them thinking I’m such a bad parent, but I have been encouraging my children to always be operating at their edge where failures can happen, not because I want them to learn from failure, it’s because there is nothing more powerful than learning that you can correct your own mistakes, learn from them, and keep moving.
David: I would agree. It is the same kind of commentary I think we would share with our kids, which is, we expect you to do your best. And I think lots of parents would say that, too. We expect you to do your best. What is your best? Well, it does put you at the edge, and it does mean that you are probably going to encounter more failure, whereas if you are in that comfort zone where you are not really pushing yourself, that is a different life trajectory, I suppose. Dealing with emotional capital as a form of capital, this really orients to a theme throughout your book, which is having a particular mindset. Maybe you can discuss with us the change in mindset that you have had, and the development of emotional, cultural, and time capital.
Chris: Certainly. Emotional capital – I think they are all important forms of capital otherwise they wouldn’t be in the book, but if I had to put one near the top of the shelf it would be this one because we could be rich in all the other forms of capital, but if we are emotionally unable to respond to the changes as they come, we are going to break down. And one of the stories we tell in the book is how USSR broke apart into a bunch of satellite states, starting in 1989, and Russia, as one of those devolved USSR states, experienced over the next eight years, 54% of all deaths in the next eight years were recorded as being due to alcohol in some way – direct poisoning, or car accidents, or whatever.
What that really speaks to is that a lot of people, when the USSR broke apart and the ruble collapsed, and a lot of jobs got lost, those people were lost – they didn’t know what to do – mostly middle-aged men. And they lost their jobs, so they lost their sense of purpose, so they drank, and many of them too much, and drank themselves to death. And so now when we look back on that we can say that was a tragedy for at least several reasons, not least of which is the fact that that was one of the most exciting periods of capital formation in all of Russia’s history.
And the people who were mentally able to say, “Wow, times are changing, everything is up for grabs, things are different,” and load into that space, many of them did quite well. Some of them did oligarch well and maybe they didn’t always do it in ways we would approve of, but at any rate, the point here is that for most people, I am convinced that when the next economic crisis comes, it is not going to be the crisis, itself, that does them in, it is going to be their reaction to it. And there are lots of ways to check out in life – you could play too many video games, you could eat too much, sleep too much, drink too much. There are lots of ways to accomplish taking yourself out of the game.
And so I’ve learned – one of the most important things I have done in my life over the past five years is to really learn how I tick, to understand that it is my responses to things that determine my experience with them – not the things themselves. We all know that two people could have the exact same experience but react completely differently, and it is the reaction that determines the outcome, more than the thing itself.
I don’t know if you saw recently, there was a woman who got a spider in her car and she freaked out and jumped out and her car kept moving and it went off and caused a big accident. So, the accident was the outcome, the spider was the initiator, it was her reaction that made all of that come together into a kind of amusing YouTube clip. So this is a really important point, really understanding how we build our emotional capital up. It is something that takes a lot of courage to really dive in there and understand how we tick, to really agree to look at those things. And this has been one of the most important things for me, for really bringing myself to this next level of joy, happiness, completion, fulfillment – it has been critical. That one has benefits all on its own no matter which future comes.
And the only form of capital that you can’t do a lot about, in my opinion, is cultural capital, which is how the people around you are going to react. So, we saw that, for instance, New Orleans reacted very differently, and badly, to Katrina as compared to how the citizens of Japan reacted to the Tōhoku/Honshu earthquake in March of 2011. In one case we saw lootings, violence, rapes, deaths, murder. In the other case we saw none of that. And the difference between the two wasn’t the severity of the accident at play, it was the culture. So, the cultural capital one is one people should be aware of, try to understand it. There are certain parts of the country that I would not live in, personally, because I think they have really poor cultural capital for any potential disruption. Many of those are major cities, and that is my personal assessment and opinion.
And the last one you mentioned is time capital, and in that one, time is the only thing that everybody has a little bit less of today than yesterday. It is something we all want to manage and prioritize appropriately. Our invitation in putting it in the book and thinking about it is to say, “If you want to be more resilient in these categories, if you would like to really be diversified and have rich capital across these other seven points, you are going to have to take this eighth one, which is time, budget it appropriately, make these things a priority.
I get this a lot, people say, “Oh, well, I know I should be doing more to prepare myself, I really should review my finances, maybe I should buy a little food to store, maybe I should put a garden in, but I just don’t have time. And what they are really saying is, they have other priorities in life. All of us, our days are very full already, so to really step into this new future and put the time into preparing, you are going to have to carve some time out, which means something else is going to have to get a lower weighting and maybe not get done.
So the time capital is really an important piece, but if we add all these pieces up, all eight, including time, for me what this becomes is an invitation to really step into your gifts, to really look at the fact that yes, there are some really extraordinary risks coming in the future, but that if you, yourself – anybody listening to this – if you, yourself, are not making the changing in your life that are needed to step into this new future, if you are not becoming the change you wish to see, then nothing will change and there is a good chance that you will be facing a very disruptive, chaotic period in the future, rather than one that you expected, you were prepared for, that ultimately doesn’t impact you all that much, which means you can then be in a position to really be helping the other people around you who didn’t take those steps.
David: You have a framework in which you operate, the Three E’s, as you describe them. Maybe you can summarize them and comment on a fair basis, the helpful nature of a framework, but also some of the limiting aspects of a framework as you analyze data and plug it in.
Chris: The Three E’s are Economy, Energy, Environment. The economy is the main E that I analyze most things through because everybody cares about their pocketbook and we all want to know what is happening in the markets and all of that. And so, just in that E alone, everybody is aware of how unsustainable even just the U.S. model is, and we look at entitlement programs that are underfunded by a net present value number that is anywhere from 50 trillion to 200 trillion, it doesn’t matter. Neither of those numbers will ever get paid back.
We understand that we have been accumulating debt at twice the rate of our underlying income or GDP for decades. We know that is unsustainable, so we all know this all has to change at some point, nobody quite knows how or what. My view is that change never seems to happen by insight at the political level, it happens because of pain. So what happens when a debt model breaks down. Well, it gets a little chaotic and a lot of people lose a lot of money.
My view on the economy can be summarized into just this one question: Who is going to eat the losses? We have too much debt floating around. I have a whole point of view around just the first E, economy, but Dave, it is around how it has to grow all the time. And if it is not growing it is collapsing. So there is this really awkward binary state of either being pretty much okay or in complete disarray. So the first question to ask is, well, can it grow forever then? And the answer to that is, “No.” And to understand why we have to wander over to energy, in particular, but also the environment, which are the places that provide the fuel and the resources, respectively, for growing our economy.
When I go to the fuel side of this, I know oil, as we are talking today, has just plumbed a brand new low, it is in the mid 30s right now. It is a really low price. But that price is masking the fact that all new oil out there is hideously expensive to get. Companies are not prosecuting what are called the First Investment Decisions, the FIDs. They are not out putting new capital into infilling old fields, exploring for new fields, tapping the fields that we know exist whether those are in the Bakken or up in Canada. So, guess what? In two or three years this is going to translate into a real shortage of oil unless the economy is in disarray. So it’s a whole piece of analysis that I think most people are unaware of, but really, we should keep our eye on the ball of just where we are in the energy story.
It is just an astonishingly interesting, but also a little bit worrying story when we combine that with this idea that we have an economy, it’s like, “No, no, I need to keep growing forever.” And oil is the prime lubricant of growth. So, there is a story there that is developing, and then the third E, the environment, both the things that we take from it and what we put back into it, which would be resources and waste. Just on the resource side, as I look around the world and I’m looking at ore bodies or water or soil, every single one of these things is disappearing, and not just a little bit but at an exponential rate. If you look at ore body concentrations, how many grams per ton of gold is a typical find now compared to ten, even 20 years ago, how about silver, how about bauxite, how about indium, how about all these critical elements?
What we find in that story, David, is that every single thing that we count on for a modern, ever-expanding industrial lifestyle is just getting a little bit deeper, a little bit more dilute, a little bit more difficult to extract and process. And so, when we put all of these things together I just come up with one word, which is unsustainable. And if the economic system can’t be sustained and we know that humans love to sustain something as long as possible until it actually collapses on them, I think people need to be prepared for this idea that that is what we are going to do again. We are just going to pretend as if there are no difficulties, we are going to paper the markets over, we are going to print the palliative and we are going to ignore what is really happening in the system until it is un-ignorable.
And then I think we could actually have some very difficult financial moments to live through as a people, but it could get even more difficult in that supply chains could get disrupted. Who knows? Nobody knows. So, that is ultimately the foundational work that leads us to say, “Hey, maybe we should think about building up other forms of capital, just in case, just in case.” But also, if we do that, notice how much happier we are and how our quality of life has actually been really improved here today, as well. So then the next question becomes, “Well, why wouldn’t you do that?”
David: Exponential growth, if it is driven by exponential expansion of debt, it is obviously unhealthy and unsustainable. If you have exponential growth driven by other factors, is there anything inherently wrong with that? Say, for instance, the advice that you have given to your kids of adding value in entrepreneurship. It seems that there are ways to create exponential growth that are not necessarily debt-driven and may, in fact, be more sustainable. That is one issue.
I just got back from Hamburg, Germany, and was fascinated just by the geography. They benefitted from the sea lanes being opened, and the improvement of an engineering feat – the steam engine as we know it – it improved commercial trade to the West, and what happened when commercial trade expanded to the West is that Hamburg won and they grew exponentially, and Lübeck, which had been a preferred geography, with trade directed to the East via the Baltic Sea, went into a permanent economic decline.
And so there were these changes of a technological nature, of an entrepreneurial nature, of a value-added nature, which all of a sudden shifted geography and created an entirely new trajectory. Lübeck, nobody care about. Hamburg, to this day, is still at the center of global trade as one of the largest port cities in Europe. So I think of what you have told your children and wonder if that might not be the answer for exponential growth.
Chris: Well, indeed, there is a little bit of a race on. I have been talking about the dark side of exponentials, which is where we are just mindlessly chewing through resources without really a plan for what we are going to do when we get to the end of that little tube of goodies. The other side of this is, of course, that with technology we are able to do things far more efficiently and far more effectively than we used to, and so I think that there are extraordinary opportunities built in this story of change, of disruption, a little bit like the USSR when it devolved, and there will be another very exciting period of capital formation.
But I do think the three questions you want to ask yourself always when we are about to go through a big period of change like we are is, “What things are we going to keep doing?” Listen, there is a lot of the story that doesn’t change, right? We are going to keep loving our families, we still want to put food on the table, and we would like to live in a house with a roof over our heads. None of that changes. But there are some things we maybe need to stop doing, and I think those are the wasteful practices, the uneconomic practices, we have a lot of really unfortunate malinvestment in our society because of poor subsidies and tax things that were really attempting to make things happen that maybe shouldn’t have happened.
So a lot of things we should stop doing, most of them wasteful in nature, but what should we start doing? What are those new things? And it has just been astonishing when you use something like Uber, it makes a lot of sense, right? I get to just look on my phone and call a car. It was really a very efficient way of organizing resources. That makes a lot of sense to me that these exponential changes that we are seeing and our ability to manage things really more efficiently.
But I guess underneath all this I have one other thing we need to manage, and that is our expectations – the expectation that we are all going to be able to basically work service jobs forever is really founded on this idea of surplus energy. And so if we don’t very actively, very pro-actively manage how we are going to do this energy transition away from fossil fuels, not because I’ve been watching all the Paris stuff and I don’t know if we are going to do this for political reasons, but the fossil fuels will not last forever, we know that. And so the question is, how are we going to migrate into that next iteration of energy as humans? If we do it poorly we are all going to start living on trees again and we’ll cut them all down and we’ll burn them and that will be bad and we’ll look like Haiti. So that is a possible outcome, but there are other ones here, too.
And I am very excited by what we are learning in terms of energy. And one of the key points we make in this book, and I also made it in the crash course is this: We don’t actually need any more technology. It will be great. We don’t need any more to begin doing things very differently. What we need is the political will, and I mean that internally, not just politics as we see them on the American landscape across Washington. We need the political will and we need the new social narrative that says, “Here is how we are going to start doing these things.” Because we do need to start doing them differently.
We definitely need to be less wasteful. A simple example: We know how to build houses now with twelve inches of insulation in the walls. We can do that any time we want. We don’t, but it is not for reasons that make economic sense, environmental sense, resource sense, national security sense. It doesn’t make sense on any possible dimension except short-term cost. So if we could start to modify that, and other things like that, that is what we need to do, but it is not a numbers thing. I consider myself in the narrative-changing business, not the information business. We need to tell new stories about who we are and how we live.
David: And I like that, particularly at an individual or family level, and I say that because I think when I have heard differences of opinion on environmental issues, it really has to do with who is sourcing the solutions and if it is a top-down political approach, then there is this suspicion, you might say, “Why is big business interested in it?” Because more regulations equal less competition for them. “Why is big government interested in it?” Well, quite frankly, because they don’t mind the ratchet higher in terms of interference in any or every area of the economy.
But there is, beyond those suspicious observations, this notion that individually, you are talking about issues of stewardship. You are talking about someone, whether you are a member of Ducks Unlimited, or what have you, who is looking to preserve, conserve, and grow but on a very sustainable basis. So I appreciate this notion of narrative change, particularly as it relates to what we do with it. I think that is what I like about those three questions that you just asked: Should I keep doing this? Should I stop doing this? And what should I start doing?
Again, it is not that this is being done from a central planner’s desk as much it is personal choice, and recognizing that we have responsibility here. When you look at the collective you can say, “Okay, there is collective social responsibility, but that is only because every one of us bears individual responsibility and you add all that up and you do end up with collective responsibility. But again, it is a bottom-up approach.
Chris: It is, and this ties in perfectly with one of the points we make in the book, and listen, I grew up with this – it is a narrative that I grew up with, which was that humans just wreck nature. That was just sort of a thing I grew up knowing because every time a bulldozer moved into the field across from your house something ugly happened. And so I grew up with that, and watching all the headlines develop. And what I learned instead is that humans can be incredible agents of abundance and change. That same clever brain that can give us a Smartphone or a car can also build topsoil at 100 times the rate of nature alone, or we can actively use our brains to create an old growth succession edible forest in a fraction of the time that nature could. And so this is some of the things I see, particularly the younger people, “I want to be part of that, I want to feel like I am actually a positive addition, not just to humans, but to all of the world, all of nature included.” And we can do that, but it starts with a narrative change which is A) that is something that I can do, and B) it is important. And I think people are starting to get to that and understanding that it comes down to that individual sense of responsibility. I only work at the individual level and it doesn’t even occur to me to think I could somehow convince a million people to do something because I passed a law. And I’m a fractal guy. If we don’t have individuals thinking this way, groups of them won’t. And unless an individual is operating in the best way they know how, whole groups of them won’t be either. So that’s why I put all my effort into working with people, families, individuals, instead of trying to figure out how to get the right article in the New York Times or lobby the right Senator. I’m thankful people do that, but it’s not me. If we aren’t the change we wish to see, if we’re not operating in a moral, responsible fashion ourselves, we can’t expect anything else from the world around us.
David: It is this notion that if we do things the way that we are doing them now, then this isn’t going to work forever. But there are different ways of doing things. When I think of resource utilization I think of a kibbutz in Israel, gardening in the desert and seeing massive yields off of very limited resources. You highlight that farming operation in Northern California where they have five to seven harvests a year, which means their return on capital on one acre – they are seeing revenue of $100,000 dollars per acre where the normal is closer to $14,000. And it seems we are in need of doing things differently, and if we did, then resources are nowhere near becoming dilute. Would that be correct?
Chris: It absolutely is. We just need to begin doing them this new way. And for that to happen, I think we have to understand that it would be important to do that in those ways, and that we should have more of a conservation approach. Maybe it’s not our job to drill up the Bakken as fast as we can, maybe it would be awesome for people in 100 years to have access to something left down there, too. And so, we should be taking out only the resources we need, understanding that we are using them as effectively as we can, not to be stingy with ourselves but if you can do it better and are capable of it, and it makes economic sense, and it is environmentally great and we actually have healthier food, again, we just back to this question of – well, why aren’t we?
And the answer, unfortunately, is this simple, David. It is because we haven’t done it that way so far. If you go into a company and you really want to turn it around, often you have to change the culture. It’s still got walls and equipment and people and all that. Usually it’s just, we are talking a culture change. So, that’s one of the things I’ve learned over time is that we humans, actually, as much as we have the written word and movies and things like that, we are still story-driven.
And so the question really comes down to, do we have the right story running right now in our own personal lives, but also as a nation, to really match the times we live in? And my answer to that is, in most cases, no. We have a story that says, “We’re the world’s policeman, we have access to all the resources we need, we’ll wait for Elon Musk to make enough electric cars and somehow that will solve everything. But that doesn’t really pass the sniff test. When you really add up the numbers and just even get a small spreadsheet going you find out, “No. No, no, no, we really should be doing things very, very differently.”
And what I love to hear is all the people are waking up to that, waking up to the idea that something is not right in our current narrative, that the world is going to require more from us than what we have done and how we have done things in the past. And that the invitation in that means that there is an extraordinary opportunity for individual development or building all different kinds of wealth, but it really takes a new way of looking at the world.
David: As I read your book and reflected on this idea of resilience as you framed it, the idea of surplus energy seemed to be really critical, not just in the area of energy, but more broadly understood. When you talk about emotional health, or mental health, or financial health, or other areas that, quite frankly, require surpluses for optimal performance, if you are starting from the position of operating at a deficit, then any further stress to that system, again, whether it is an emotional system or your physical body system, it can have a negative effect, and even compound against itself.
Stress experienced, though, when you are in surplus is a very different thing. So you are right, it is a mindset of creating surplus energy in every area of the capital categories that you have talked about. So, as we wrap up, if there is anything that you would like to finish with that is great. I love the idea of surplus energy.
Chris: Thanks, and I hope anybody listening would go and look at some of the video series we have which describe surplus energy in some detail you find that peak prosperity at The Crash Course, very easy to Google and find if you can’t find it direct on the site, because that idea of surplus energy is really critically important and that probably betrays my science background that I come to all this with, where I learned intimately that organisms either have surplus energy or they don’t. And if they do, everything is fine, systems are great. And if they don’t, just like you are saying, you get this cascading, even compounding series of failures that happen when you are operating at a deficit. And I love the way you framed it, though, that deficit could exist anywhere in any of these forms of capital we have talked about. So, thank you for that, and thank you for having done an obviously very careful job of reading the book and conducting a great interview.
David: Glad to have you on the program again, look forward to the next iteration. Are you planning another book anytime soon (laughs)?
Chris: Well, no, they are the most expensive business cards you can write (laughs). So, as we develop material, maybe, but no, we have a lot on our plate for this year that doesn’t include writing another book.
David: Well, you have me thinking about the garden and the orchard, which are just a figment of my imagination today, but may not be tomorrow, so I appreciate that. And if it ever materializes into jam or pickled goods, you will be the first to receive it via UPS.
Chris: (laughs) I love it when the brown truck of happiness rolls up my driveway, so I will look forward to that day.
David: All right. Have a great day.
Chris: Thank you. You, too.
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Kevin: Something, Dave, that I have always enjoyed about Chris is that he looks at it from his doctoral point of view. In other words, as he analyzes an organism, like you said, he is looking for surpluses. If a person walks away with anything from this interview it is, in what areas in my life do I need to build a surplus? I’ll give you an example. As a person ages we start to know that the surpluses start going away, and when a person gets into their 80s, 85-90, a simple fall can be a crisis that takes them to their demise. It is because those surpluses have gone away. Yet you see a system that has surpluses built into it. To someone young, healthy, a fall is something that they may get up and go play the next ballgame the next week.
David: And this is the same idea that we talked about with Joseph Tainter so long ago, a year or two years ago, where you deal with systems of high complexity, and as long as the systems maintain a surplus of energy then they can continue to move along and absorb shocks. Where you see complex systems fail is when they experience shocks and they don’t have a requisite reserve.
Kevin: And usually that is when they are running on debt. Look at our economy. We have talked to our clients. Simple things: Get out of debt. Get out of all paper assets, which are usually a form of debt. Have some gold and silver. Have a little bit of food set aside, like Chris Martenson is talking about. Like he said, he is a fractal guy. Do it from the bottom up and then the government, you don’t have to continually argue about whether you are a Democrat, Republican, liberal or conservative, as far as environmental issues go.
David: From Malthus forward there has been this idea that the end is nigh, and I don’t know that that is really where Chris hangs his hat. There are concerns, and there are reasons, too, in those areas of the economy, energy, and the environment, where if they continue, and we see an exponential trend continue and that does not change, then you have major, major issues, and we need to be cognizant of those on a long-term basis.
Kevin: You bring up Malthus. Malthus can scare you to death because he takes exponentiation and he says if population continues to grow at this rate it is going to do this to the world. You can always have those kinds of dire consequences. You can even take market moves and say, “Gosh, if silver rises this much, or falls this much, for the next however many days, it will either be worth zero, or $10,000 an ounce. But what happens is there are stabilizing effects, and you can never take exponentiation to its conclusion and see that outcome, but what you say is, “You know what? We are pulling too much out of this area, and we are not giving enough into this area.”
David: There is no doubt that innovation and change are necessary in these areas of the economy, of energy, and the environment, and I do think that managing our expectations, as Chris suggested, is a very, very important thing – to look and say, the next 20 years might not be like the last 20 years has been, and are there things that we need to change? Are there areas where we need to personally develop additional surplus to draw on in the future. Again, that is something of a very practical nature that isn’t so much that the world is coming to an end, it is what kind of life do you want to lead now, and in the future? And you need to be very intentional about organizing your resources to achieve those goals.
