"(T)o say that the individual is culturally constituted has become a truism. . . . We assume, almost without question, that a self belongs to a specific cultural world much as it speaks a native language." James Clifford
The
functional managerial role in modern business is weak by Nietzsche’s standard.
That is to say, a manager is of the vulgar rather than of noble strength. After
highlighting Nietzsche's project more generally, I discuss his notions of
strength and weakness. I then delineate Nietzsche’s attitudes toward wealth,
trade and modern industrial culture—the immediate context for his concept of
the modern business manager. I argue that Nietzsche views this context as decadent.
Within this framework, Nietzsche’s rendering of the primordial commercial
relationship can be taken as his genealogy of the modern business manager.
Finally, I describe the modern business manager as akin to the ascetic priest
in being a herd animal desperately seeking to dominate the herd and,
presumptuously, even the strong. The full essay is at "A Nietzschean Critique of the Modern Manager."
It is difficult enough diagnosing a dysfunctional culture in
a large corporation—imaging having a large American city as a de facto patient. Not that I had any
idea what treatment could possibly cure a social-psychological disease when I
was in San Francisco. I, like so many other new-comers there, temporary or
permanent, got the sense after only a few weeks that something was very wrong
in the way people were interacting there. As a corporate man in his late
twenties from L.A. remarked after just ten days in the city, “The people here
are very rude.” As he described the
particular behavior pattern, I was stunned; it matched what had taken a month
for me to discern. This began my curiosity as to the dysfunctional culture
undergirding the wholesale lack of manners, and, more particularly, how it is
that a distinct mentality or value-set and behavioral trait can show up in so
many individuals.
What lies beneath the clouds is not necessarily visible from above. (Jeff Chiu of AP)
By 2015, software engineers at internet-based companies such
as Google and Facebook had been moving to San Francisco and commuting to work
in Silicon Valley for years. The “techies” were widening the economic
inequality in the city, which, along with the related hike in rents, was
causing tension—even anger—on the street. This sort of explanation is at root
political in nature. While I do not doubt its validity, it does not do justice
to the social-psychological dimension at the individual and interpersonal
levels. In other words, I would like to provide some finer brush strokes to
finish this picture of a modern American city in the grips of a pathogen.
By 2014, San Francisco had “become the hype- and capital-fueled
epicentre of America's technology industry, which has traditionally centred on
the string of suburban cities known as Silicon Valley 40 miles to the south. In
2011, Mayor Ed Lee [had] introduced tax breaks for Twitter and several other
tech companies to encourage them to settle in and revitalise the downtown San
Francisco neighbourhood South of Market, or Soma.”[1]
Three years later, the city’s unemployment rate was just 4.8 percent, while
California’s was 8.3 percent. In 2013, job growth in San Francisco County was
the highest of any county in the States.
At the same time, “(m)any long-time San Francisco residents”
worried “not only about being forced out of the city they love, but also that
their city [was] being changed for the worse.” Critics were saying that San
Francisco's “communities of alternative culture, ethnic or otherwise” were being
“turned into playgrounds for rich people.”[2]
According to Ted Gullickson, director of the San Francisco Tenants Union, the Castro,
the proverbial “gay mecca,” was more homeowner and much straighter, much whiter
and much more conservative."[3]
If the city’s soul was “its social and economic diversity and status as a
refuge for those outside the mainstream,” then the city was indeed losing its
soul.[4]
I concur, though for a reason—one much deeper than the socio-economic shifts
and the resulting tensions. I submit that enough of the city’s people, most
notably those who are under 35 or so, had lost, or more likely never had
manners. More serious than this euphemism implies, people comprising a major
segment in the city’s population were assuming a mentality that could be
labelled, The Zuckerberg Syndrome. The underlying pathology is psychological at
root.
San Francisco was indeed ground-zero in the American trend
of increasing economic inequality, and the social mores were starting to burst
at the seams. The “influx of so many young, rich tech workers [was] causing
significant tensions. Starting in mid-2011, rents and house prices began to
soar. Eviction rates soon followed as property speculators sought to cash in by
flipping rent-controlled apartment buildings into flats to sell.”[5]
No-fault evictions “displaced nearly 1,400 renters in 2013. About a third of
those evictions were under California's Ellis Act, which allows landlords to
evict tenants and sell their apartments.”[6]
Ellis Act evictions increased by 170% from 2010 to 2013, according to a City
study.[7]
The ability to essentially bid up the rents that pushed long-time residents out
was increasing tensions—even turning the city into “an angry city,” according
to one retired man there.
The long-time resident told me that the rising number of
vocal confrontations between strangers, such as the ones I had I had witnessed just
hours earlier between two middle-aged drivers in a parking lot and two young
adults on a sidewalk were a function of the widening gap between the haves and
have nots in the city. That Facebook, Google, Apple and other tech companies
located in the string of “silicon valley” cities in the south area of the bay were
commuting about 35,000 techies each workday between their high-rent residences
in “the City” and the companies in Silicon Valley was undoubtedly stoking the
fire. Just the sight of the sleek white, double-decker buses stirred jealousy
and resentment on the street and most probably a sense of superiority, even
snobbery, inside the luxury vehicles.
According to Nietzsche, resentment pertains to the weak. As
for the strong, self-confidence rather than arrogance is the hallmark
characteristic. The onlookers can thus be reckoned as “herd animals” and the
bussed kids as “new birds of prey,” whose presumed superiority is in fact a
hypertrophic instinctual urge to dominate. In other words, both are weak—which
may explain part of the jealousy. In contrast, the strong are saturated with
the self-confidence that is innate to strength rather than a need to be
superior. Put another way, strength and its overflowing power are content in
themselves, hence the strong do not view the weak as evil (whereas the weak
view the strong as such). The strong seek to win a race, for instance, rather
than focus on the onlookers, whereas the weak a race cannot resist the urge to
be cruel both to the strong up ahead and to the onlookers.
I contend that the aggression being inflicted on a daily
basis in San Francisco during its second wave of techies—the first being during
the “dot.com” heady days of the 1990s—extended beyond the attention-getting vocal
spats and “nudges” between strangers in public places. I do not believe, however, that widening
economic inequality is a strong enough force to trigger specific incidents of
aggression, whether passive or active. The underlying cultural change was
considerably more subtle even as it was stark on the individual and
interpersonal levels.
I further contend that a cultural trait has no “collective”
basis as an entity beyond the minds and behaviors of individual human beings.
Arrogance, for instance, can spread through a number of agreements, whether
tacitly or consciously made, between two or three people at a time, that a
given attitude, value, or specific behavior is good rather than bad; hence it
is permissible rather than to be shamed. One person “tells” another that being
rude in a certain way is cool, and the other person in turn “tells” a few of
his friends. Soon, a high enough percentage of people in that segment of the
population are being rude on a regular basis in a particular waythat is
thus distinctive.
Having been in the social sciences for some time, I was
curious to study how a cultural trait metastasizes—how it is that so many
people could be rude in so precisely the same way—so I informally interviewed a
number of long-time and new residents alike, of various ages and trades.
Detecting a common refrain, I narrowed my focus to young adults between the
ages of 21 and 35—the Millennial Generation. It was not long before a distinct
pattern involving a certain mentality and a distinct behavior-pattern emerged,
which people not infected typically identified as being unique to San Francisco
though at the same time being the leading edge of a broader trend then going on
in American society. I turn now to my data, obtained through observation and a
series of interviews consistent with Clifford Geertz’s method of
participant-observant, or époche.
A significant proportion of the young adults, most of whom
were far away from their parents, appeared to feel free to treat other people
their age and even much older not only with a lack of respect, but also with
blatant rudeness tantamount to brazen passive aggression—and without any sense of shame. Typically on
meeting someone new, for example, the delayed-adolescents would quickly size
him or her up. Is this person on my level? Can I expect to get something out of
him or her? If the answers are negative, the interest, albeit self-centered, in
the other person quickly turns to a dismissiveness and dismissal. Even in the
middle of a sentence, the other person can be hit with a rude turning-away
without warning. Such rudeness is so blatant and severe it can be counted as
passive aggression. The anger manifests not only in the turning-around and
walking away, but also when the person merely turns around and ignores the
other person, even while that person is asking, “Why are you ignoring me?” or
“Why are you being so rude to me?” I witnessed an older woman asking a 25
year-old(ish) man both questions, after she had approached him to ask him about
a noise audible in the patio of the coffee-shop/bar, with the boy continuing to
stare off to the side as if she were not there.
At a coffee shop, I myself asked a similar guy an innocuous
question only to get a curt answer. Strangely, on his way out, he said goodbye
to each of the two guys he had also
met briefly and who were then talking with me. Saying “goodbye” twice made it
especially obvious that he was ignoring me. Why would a stranger make such an
effort on something so trivial as saying goodbye, especially considering that
he knew none of us and the question I had asked had not been offensive? More
than the rudeness, I felt aggression.
The presumption itself that such anger can be unleashed on an innocent stranger
is itself a problem, particularly when it becomes part of a culture (i.e.,
widely understood to be acceptable rather than blameworthy). Put another way,
why did the guy feel such a strong urge to reject a stranger whom he would be unlikely
to encounter again (especially given his curt reply to my question)?
When I had been a student at Yale and a member of the Yale
Political Union, the chairman of the “party” thereof that I had recently joined
asked me to change my plans on the upcoming Friday night so I could attend a
social party in the bell tower where the new members would be “tapped” to enter
the secret society that the party owned. In actuality, he wanted me to attend so
his three friends, who were the only ones tapped, could have the pleasure of
seeing other members turned down, or rejected. In other words, the pleasure of
selecting and being selected was not enough psychologically. The same
phenomenon would be part of the epidemic to hit San Francisco decades later.
At a group for speaking French in
San Francisco, a middle-aged New Yorker described to me (in English) another
manifestation of the angry city.
“People are blunt in New York,” the Lebanese man of around
50 admitted. “That bluntness can be rude, sure, but here there is also passive
aggression.”
“Have others from New York noticed the same thing?” I asked.
“Yes. Several others living here now have told me they had
noticed it. In New York, people will tell you to your face what they think; the
people here say one thing to your face and another to your back.”
In other
words, the passive aggression could manifest as duplicitous betrayal too.
Moreover, the level of such aggression in San Francisco was not the case in
other cities where a person might expect it, on account of overcrowding for
instance.
In terms of dating or just “hooking up” to have sex, the
following scenario—a true story which I verified from both parties—may have
been paradigmatic in San Francisco in the Millennial Generation. A 28 year-old
guy who worked at the time for Sacs Fifth Avenue met a 35 year old woman in a
bar and the two clicked. After kissing, he persuaded her to change her plans
the following evening so she could go out on a date with him. They met after
work at another bar, and sat in the patio in the sunshine. She figured they would
go out for dinner and then perhaps to a bar or to his or her place, so she was
surprised when he informed her he would have to leave in an hour to attend a
departing co-worker’s get-together at another bar. Seeing her mood quickly
sour, he made a not-so-subtle reference to her looking older in the light, and
that he should not have kissed her. He did not even feel any obligation to
carry through with the date, even though he knew she had re-arranged her
schedule to accommodate his desire to go out the next night. Thinking on her
feet, she quickly called the guy she was to go out with later to tell him that
she would be able to make it after all. She told me she had a good time on the
second date—the first time she had had two dates on the same evening—and she
got laid to boot! Neither the man nor women were teckies, so the phenomenon was
not, or at least no longer, techie-specific; rather, it had spread through the
Millennial Generation.
Certainly in San Francisco’s iconic gay “community,” the
guys (generally speaking) were “always on the lookout for the next best thing.”[8]
From that standpoint, dismissiveness toward any guy not in the running for the
next time is a foregone conclusion. Zuckerberg’s innate sense of superiority
could easily translate into a presumed entitlement to not only ignore
interested guys eliminated from being “the next best thing,” but also get
pleasure from inflicting pain so those guys feel
they are being rejected.
“I hit on this guy at the Edge [a bar in the Castro] but he
blew me off,” a gay guy recounted to me.
“Did you say something insulting?” I asked.
“No, I complimented him. So when was leaving the bar and
passed me and two other guys who had talked with him—the three of us were
talking—he went out of his way to say good-bye to each of the other two.”
“He really wanted you to know he was ignoring you,” I observed.
“For some reason, the guy felt the need to put a lot of emotional energy into
making sure you would be hurt. It’s not like he had reason to think he would
run into you again. What I wonder is where all that anger is coming from—seems
sadistic to me.”
A few weeks after I had spoken to guy who was so blatantly
and intentionally ignored, I
submitted the scenario to a San Francisco native—a women in her mid-20s dressed
in “gothic” black. Her explanation uncovered a mentality utterly foreign to me.
“The guy being hit on was probably pissed that the guy he
didn’t want hitting on him ruined his social image so he took it out on him.”
“You mean he was punishing the other guy?”
“Yes,” she replied, “the guy might have decided the other
guy ruined an otherwise perfect day, so he should pay for it.”
“I’ve never heard of such a thing!” I exclaimed. “It must be
something going on in your generation.”
“Being able to get stuff instantly with apps has changed
personalities,” she added.
“You mean into spoiled brats?”
“Yes,” she said.
Visibly excited about teaching an older guy so ignorant of
her generation, she told me that to let a friend know that the person seducing
him or her in a bar, for instance, is not good enough for him or her, simply
put a hand on the friend’s lap as if the friends were in a relationship. That gesture
sends the signal not only to the seducee, but also the seducer, that the latter
is not good enough in the opinion of the friend. I was struck by the sheer
brazen disregard for the seducer’s feelings.
The message must have been getting around enough young men
and women in the city that it is fine to insult anyone who is presumably lower, of no future use. Treating other
people as if they were throw-away “objects,” which involves deeming them as unworthy
of even common courtesy, intimates sadism, or at the very least a subterranean
current of pent-up anger. From where, I wondered like a scientist trying to
find mass in space to account for indications of gravity far away, did the
anger behind the passive aggression come?
My theory highlights the cultural role of internet
companies, their respective founders, and employees, with near-proximity
intermingling spreading the dysfunctional attitude through the generation. The
sheer number of “techies” who had moved to the city and worked in “the mostly
white, male-dominated, monied monoculture of the tech industry”[9]
was sufficient to have a major impact on San Francisco’s social mores and
dominant attitude, especially considering the impact of the preexisting
“laid-back” culture sewn by the hippies decades earlier.
A colleague of mine from Detroit Michigan reported to me after
reading this essay that he had begun to see some of the same behaviors since
techies had begun to move there in significant numbers. Although “like some
hippies [the techies had] the same sense of social mission to transform the
world for the better with technology,” this abstract idealism to be practiced
on people at a social and geographic distance was dwarfed closer to home, as in
social gatherings, for example, by what Nietzsche describes as the brain
sickness of the weak who are too weak to resist their urge to dominate others.
In more modern terms, the sordid flu is of malignant narcissism mixed with a
presumptuous entitlement that justifies rudeness, even passive aggression,
without any shame. Rudeness can be so severe that it becomes passive aggression.
As such, it can remain undiagnosed as something real. Hence, my colleague’s feedback is significant.
Speaking with two retired men in San Francisco, I detected
an alternative hypothesis.
“They are threatened by the older generations,” one of the
men said, “so they lash out at us.”
“Why do they feel threatened?” I asked, skeptically.
“Because we’re straight-shooters. They use passive
aggression because they are insecure.”
“But why are they so angry at us?” I asked, straining to
understand something I had no intuitive sense of.
“We have put them in a tight spot. Not enough jobs. A
[federal] debt of over $17 trillion—money we spent on ourselves that they will
have to repay.”
“So it goes well beyond not respecting their elders.”
“Yes, and it is a recent phenomenon.”
The office cultures in Silicon Valley may have served as
incubators. A climate of arrogance would either have come from the top or been
tacitly tolerated. One techie told me that the people at Facebook do not
respect the users.
“Does that come from Zuckerberg himself?” I asked.
“Yes.”
“I’m not surprised,” I replied, “considering how he treated
the two guys at Harvard who were working on a social network there.”
“That’s right,” the teckie confirmed.
“I’ve studied organizational culture,” I said as a sort of
debriefing. “It would not surprise me at all that Zuckerberg’s attitude toward
other people—his manipulations and sense of superiority—as in that
psychological experiment on Facebook’s users—defines the company’s culture,
which in turn forms the values, attitude, and conduct of the employees.”
This raises the thorny question of whether the authorities
at the area’s social-media companies bore any responsibility in having spawned
or at least condoned the mentality of self-centered arrogance, rather than
trying to eradicate it. In other words, did the companies’ respective
managements fail in their corporate social responsibility? Can we hold them
blameworthy if they were blind to the brain sickness, being infected
themselves? Can we hold Jack Dorsey, the founder of Twitter, responsible, given
how he answered a question on CNBC television in June 2015 regarding whether he
would serve as CEO on an interim or permanent basis beginning in July? “I’m not
going to answer that question because it’s not what I’m focused on,” he said.[10]
It would not take much for his employees, and those of other internet companies
in the Bay Area to ignore questions from tourists on the street, or from
strangers in a bar or coffee shop by merely thinking, “it’s not what I’m
focused on.” Indeed, such dismissive arrogance is perfectly in line with
walking away from a conversation unilaterally is a social context without even
bothering with “excuse me.”
It is perhaps no coincidence that HIV was spreading most at
the time in millennial generation. Why bother wearing a condom to protect the
other person if he is not what is being focused on? Why be concerned with the
interests of a person who is not worthy of respect anyway? Rather than simply
being self-centeredness, passive aggression is also involved.
The distinctive pattern of the cultural dysfunction includes
an absence of any sense of responsibility in following through when doing so is
no longer of interest, even if other people are relying on the follow through. The
pattern I discerned goes something like this: Jim does Susan a favor by
rearranging his schedule to buy her a ticket to a rock concert, and Susan fails
to meet as agreed to pick up the ticket because she feels like doing something
else with another friend.
Lawrence Ferlinghetti, who had “put the city on the world’s
counter-cultural map by publishing the work of Beat poets such as Allen
Ginsberg and Jack Kerouac, described a “soulless group of people,” a “new
breed” of men and women too busy with iPhones to “be here” in the moment.” The
new breed can indeed be characterized as soulless in the sense that shame does
not touch them. I am not referring here to a mere lack of social skills and
even a selfish desire to use people for a person’s own ends; rather, the sheer
presumptuousness of the arrogant dismissiveness of people deemed lower or
beneath is striking in the pathology. I suspect it may be distinctly American,
with San Francisco being the epicenter of the socio-psychological earthquake.
The pathogen may have been so associated with the Millennial
Generation because it was sealing itself off from the other generations. A
sixty year-old man, for example, would hardly continue to put up with such
blatant disrespect as that which is laced with passive aggression. Abject
humiliation can only result in social distance. In the film, Social Network, Mark Zuckerberg is
depicted as treating a distinguished lawyer with blatant, unashamed disdain at
a meeting. Zuckerberg is looking out the window while the elder man is
speaking.
“Mr. Zuckerberg, do I have your full attention?” the lawyer
asks.
“No,” Zuckerberg replies.
“Do you think I deserve it?”
Zuckerberg again says no. Adding insult to injury, he goes
on to ask whether he adequately answered the lawyer's “condescending question.”
It is telling regarding American society that Zuckerberg’s
fortune and social-media technology have been so lionized, and yet the prospect
of his values, attitude, and conduct coming to define an entire generation
somehow escaped attention, at least as of 2015. That a founder of a company can
come to define its organizational culture is nothing new; that similar founders
would be drawn to the sector, such that the organizational cultures have family
resemblances, and gain sufficient traction to spread throughout a generation is
more astonishing.
Can one person's persona infiltrate an entire societal system, viewed here as a network?
(Justin Sullivan/Getty)
As for the sources of the passive-aggression element, I’m
not going to attempt to psychoanalyze Zuckerberg or Dorsey. I can posit,
however, that the internet companies may be one source. “According to
TINYpulse's poll of 5,000 engineers and developers, tech workers are less happy
than workers in other sectors in every key category. For example, only 36% of
tech workers say they see opportunity for professional growth, compared to 50%
of other workers. . . . ‘There's widespread workplace dissatisfaction in the
tech space, and it's undermining the happiness and engagement of these
employees,’ the survey concludes.”[11]
The anger may be from the unhappiness, especially if the ease and convenience
of smart phones create unrealistic expectations of instant gratification.
With its infusions of young techies, San
Francisco came to serve as the incubator enabling the transmission of the social-media
companies’ organizational cultures, including the angst, to the generation through
intermingling. The City on the Hill overlooking the
Pacific Ocean and a chilly bay had begun in the quest for the golden idol as
gold hunters headed west. That the same city would be heir to so many techie
dollars, and emerge as the leading edge of the descent of American civility,
surpassing even the brashness of New York City, is perhaps not much of a
surprise. The stunning development is instead the new strain itself, of a virus
that oozes the putrid brownish arrogance of conceit tinged with subtle, yet
very real anger manifesting as inconsiderateness so severe that it can be
classified as passive aggression. In short, passive aggression as a raging
epidemic in interpersonal relations even among strangers may have taken off in the
not so “laid back” chilly city by the bay.
1 Zoe
Corbyn, “Is
San Francisco Losing Its Soul?” The
Guardian, February 23, 2014. All of the quotes, except those from my interviews,
that are in this essay come from this article.
Should a company’s CEO use the vast tentacles of the local
retail stores to prompt public discourse on race in America? Even though
improving race relations is a good cause, extending a CEO’s personal influence
beyond the products societally requires its own justification. For a week in
March 2015, baristas at 12,000 Starbucks coffee shops implemented CEO Howard
Schultz’s intent to “spark customer conversation on the topic of race.”[1]
Schultz even made a video in which he told the baristas how they should steer
their respective conversations. If this sounds a bit like George Orwell’s Big
Brother in the novel, 1984, the
question may be whether such societal influence is legitimate from a position
of management in business.
Perhaps Shultz ought to devote some time to figuring out some better places for electric outlets in the stores. The middle-underside of a long table is not so good on knees. Put another way, if the management can't get something as simple as that right, what makes them think they can manage conversations on a controversial issue?
With the IMF reducing its forecast of E.U.[1]
economic growth for 2015 by 0.2% to 1.2 percent, E.C.B. officials still intent
to go ahead with the much-anticipated “quantitative easing” program (i.e.,
buying state bonds), and, the euro having recently fallen 12% against the U.S.
dollar since peaking, and crude oil prices below $60 a barrel in January, the
limited scale of the E.U.’s capital markets relative to their American
counterparts exacerbated the E.U.’s blight. Most directly, the lack of
diversification on the types of capital markets meant that the focus on the
bonds issued by state governments would continue.[2]
With an upcoming election in the state of Greece making stock markets jittery
due to the risk that the state might default on its bonds, the precarious
condition of a relatively undiversified capital market added, albeit subtly, to
the sense of risk in the air. Having had years to develop alternative markets
since the financial crisis, E.U. policy makers had no one to blame but
themselves—it would seem. However, a bright spot in European culture or society
may be responsible for the lack of development.
The size of the corporate bond market was at the time just
34% of the American counterpart as a proportion of GDP, according to New
Financial, a think tank in London.[3]
The E.U.’s leveraged loan and securitization markets were 19% and 17% the size
of their U.S. counterparts, and the venture capital market was just 15 percent,
again all in terms relative to GDP.[4]
Because the respective U.S. counterparts dwarf the E.U. markets by such an
amazing extent in terms of GDP, part of the explanation may involve different
business cultures with respect to debt.
With the U.S. federal debt at nearly $18 trillion and the
previous year still showing a deficit of over $400 billion, and almost a third
of student loans in default, it is easy to view Europeans as relatively debt-averse even if the post-financial-crisis
years of debt-weary states (i.e, the “PIGS”) present an image to the contrary. I
suspect that the relative skepticism on debt is in turn a manifestation of
European society being less infatuated with business and thus less reflective
of its culture. Put another way, the positive connotation that leverage (i.e.,
using borrowing in productive investment to hopefully capture more of the
returns than is possible in the case of stock-issuance capital financing) has
in the business world has been more salient in American society than in its
European counterpart. Considering the misuse of debt-financing in the American
and European housing markets that led to the financial crisis in 2008, the relative
size of the European capital markets as of 2015 has a silver lining.
[1]
Specifically, for the part of the E.U. that uses the euro currency.
[2]
Simon Nixon, “A Continent in Need of Greater Capital Markets,” The Wall Street Journal, January 20,
2015.
Between June 2014 and January 14, 2015, crude oil prices
fell by 57 percent. Between November 1985 and March 1986, the prices had fallen
by 67 percent.[1]
That time, it took nearly two decades for oil prices to rebound. Would it take
that long again? The answer has implications for how efficient the market
mechanism itself is, and in turn for public policy on energy and global warming.
According to The Wall Street Journal, the discovery of oil
in shale rock makes all the difference. The difficult question involves what
that difference might be. With less time entailed from discovery to extraction,
and less cost relative to the more traditional sources such as off-shore oil,
the supply of oil on the market should be able to adjust downward much quicker,
resulting in higher crude prices, other things equal. For example, wildcatters
in Texas discovered the Eagle Ford Shale in 2008; within only five years, a
million barrels a day were going to market.[2]
“Faster-reacting shale production could help cut supply more quickly than in
the past, restoring market balance without a decadeslong wait.”[3]
This assumes the efficient market hypothesis—that suppliers quickly reduce
their respective contributions to the market as a result of lower prices.
So it is surprising that the Journal cautions that the
faster-reacting shale production does not necessarily “mean prices will rebound
soon, or return to the triple-digit levels . . . Price pressure may need to
remain on the U.S. oil industry and its lenders for months to rein in supply.”[4]
Andrew Hall, who runs a $3 billion energy derivatives hedge fund, wrote to
investors that it is unclear how long it would take for American suppliers to
cut back due to the lower prices and even what the new price-equilibrium would
be.[5]
For one thing, oil producers sunk into contracts would
rather get as much revenue as they can, even if they will still lose money.
Although shale producers have a shorter timeframe, the short life of a given
well means that the producers are under pressure to start new wells in order to
cover as much of the initial investment as possible. Put another way, keeping
production up is the better of two bad options.
With the tap expected to remain open, the supply of oil from
shale was predicted to peak in 2020, after which the annual decrease in oil
from liquid sources would be less and less made up by oil from shale. By 2030,
the production from liquid sources could be only half of its level in 2014,
with no oil left from shale. In short, the lack of a drastic downturn in supply
during the last half of 2014 suggests that the American economy might suffer
shocks in the 2020s as oil prices skyrocket from dramatically reduced supplies.
With alternative energy representing only about 3% of the total in 2014, even
increased investment in wind and solar facilities would not counter the
anticipated drop in oil supplies.
Had the oil market in 2014 been more in keeping with the
efficient market hypothesis—with supplies dropping drastically as the prices of
crude drop likewise until the reduced supply pushes the prices back, up at
least partially—the anticipated “cliff” in the early 2020s could be either
flatter or delayed. Policy makers would have more time to get the economic “up
to steam” on alternative sources of energy. Already in 2014, when I was driving
across the Midwest, I was stunned by the number (and size) of “wind fields.”
Even so, considering that carbon emissions were at the time going in the wrong
direction—up instead of down—the continued supply of oil in spite of the lower
prices must have been relieving pressure on policy makers to reduce the
reliance on fossil fuels. Meanwhile, the lower gas prices gave American
consumers the misperception that oil supplies are just fine and a lack of
incentive to obviate global warming above the 2C degree threshold.
In short, the lack of an efficient market was forestalling
vital public policies concerning both the American economy and climate change.
It is not that an efficient market would obviate government action. In fact,
just the opposite.
[1]
Russell Gold, “Back to the Future? Oil Replays 1980s,” The Wall Street Journal, January 14, 2015.
As gas
prices were dropping during the fall of 2014 throughout the U.S., sales of SUVs
were picking up. That such drivers might find themselves with gas-guzzlers and
high prices was apparently out of sight, out of mind. Moreover, that the
increased carbon emissions might push the planet further from the habitable
zone for humans was a point entirely missing from the mainstream media as well
as office-holders. To the extent that some “socially responsible” investors
selling off their holdings in or related to fossil-fuel companies was generally
deemed to be a suitable approach to global warming, the overriding question may
be how a species could treat its own survival as if it were an after-thought
rather than a priority.
According
to The New York Times at the time, “180 institutions — including
philanthropies, religious organizations, pension funds and local governments —
as well as hundreds of wealthy individual investors . . . pledged to sell
assets tied to fossil fuel companies from their portfolios and to invest in
cleaner alternatives. In all, the groups . . . pledged to divest assets worth
more than $50 billion from portfolios, and the individuals more than $1 billion, according to
Arabella Advisors.”[1]
Although these figures are by no means “chicken feed,” the overall imprint of
such divestments pales in comparison to the assets in the American financial
system, not to mention the global system of capital. The prioritizing of
investors can perhaps be inferred here, with global warming coming up
short—given its potential harm.
The
divesting investors themselves were not convinced that their efforts would pay
off climatically. According to the Times, “(t)he people who are selling shares
of energy stocks are well aware that their actions are unlikely to have an
immediate impact on the companies, given their enormous market capitalizations
and cash flow. At the Rockefeller
Brothers Fund, there [was] no equivocation but there [was] caution, [according
to] Stephen Heintz, its president. The fund [had] already eliminated investments
involved in coal and tar sands entirely while increasing its investment in
alternate energy sources. Unwinding other investments in a complex portfolio
from the broader realm of fossil fuels [would] take longer. ‘We’re moving soberly,
but with real commitment,’ he said.”[2]
To the
extent that other investors would simply swap up the holdings for sale, the
“bad” companies would be “harmed” only marginally—certainly not enough to make
a dent in their role in the carbon-emitting process. Moreover, “moving soberly”
at a time when climatologists were warning that the global temperature would
rise more than the 2 degree C threshold (beyond which human habitation would be
uncomfortable at best) points to a major disconnect between even the diverters’
priority and the true significance of the problem.
Pointing to
the complexity involved in unwinding a portfolio is itself an indication of
misplaced priorities akin to a passenger in an airport risking his flight
merely because he wants to finish the meal he has purchased. That such a
passenger would likely be completely unaware of the foolishness of his decision
may suggest that we as a species may be utterly unconscious of our individual
and collective lack of perspective as concerning our own medium- and long-term
comfort and the survival of our descendants. Indeed, by 2014, the survival of
even the future children of teenagers could be hanging in the balance. Touting
divestment as a viable strategy, or even part of one, leaves me with the
impression that the human brain may be ill-equipped to grapple with its own
propensity to put the species itself at risk.
Letting Amtrak expire in the U.S. in favor of encouraging
other companies to pick up new high-speed routes is, I submit, in America’s
interest. I make the claim not because Amtrak trains are slow and
cumbersome—which they are—or because the food is over-priced—which it is;
rather, the company culture is the true culprit, being sordid in a way that I
suspect few employees or passengers suspect. The full essay is in Cases of Unethical Business, available in print and as an ebook at Amazon.com.
