1/6/2024 0 Comments The bleeding edge newsletterEnergy resources are scarce, but non-ferrous metals are far scarcer. One will be cleaner and the other will be dirtier. Once green electrons exist, it makes no difference whether they're used to power an EV or a toaster oven. The virtue of green electrons lies in their generation, not their use. I've heard the fervent arguments that EVs can be powered from alternative energy sources, but the arguments all fail for one simple reason. In a country like the US where the substantial bulk of night-time power comes from coal-fired plants, EVs may be marginally cleaner than internal combustion engines but they're dirtier than HEVs that cost $12,000 less and conserve energy instead of simply substituting one dirty fuel for another dirty fuel. It makes no difference whether the energy comes from a gallon of gasoline or a lump of coal. The amount of energy needed to move a given mass a given distance at a given speed is a constant. Electric drive is not truly clean or green. The idea that people in advanced economies can afford to waste anything is an inexcusable relic of a barbaric past that has no relevance to humanity's future. Gluttony, over-indulgence to the point of waste, has long been viewed as a capital vice or cardinal sin. The only way that the 90% can have a place at the global economic table is if the 10% change their worst habits and make room for the new well-informed poor. Now they all want a piece of the comfortable lifestyle that the 10% have always considered a God-given right. Our last industrial revolution changed everything because cheap and ubiquitous communications taught the world's poor that there's more to life than deprivation. For most of human history 90% of the world's population lived in crushing poverty and ignorance, but as long as the poor were kept ignorant, the other 10% could consume the lion's share of global economic output with impunity. Since many of these ideas have been discussed at length in other articles, the top ten list contains several links back into my author's archive. No matter how badly we might want a clean green transportation alternative that frees us from the tyranny of imported oil, electric drive is hopelessly uneconomic and will continue to be a financial black hole until each and every one of the following problems are overcome. The bottom line is the mainstream media, our fearless political leaders, rainbow legions of Eco-zealots and starry-eyed investment analysts all have it wrong when it comes to electric drive. So instead of drilling down into the detail like I usually do, I'll focus today on ten fundamental business and economic forces that will leave electric drive stranded on the bleeding edge of transportation technology for decades. After making the presentation, it dawned on me that investors who want to build bullet proof portfolios for the next five years deserve nothing less. They wanted a high level overview instead of deathless analysis of techno-trivia. It was a different kind of audience that wanted a better understanding of the path their business would take over the next few years. Last week I traveled to Stockholm and spoke at the Annual Partners Conference for CTEK Sweden, a global leader in smart battery chargers for conventional cars, trucks and motorcycles. Hope is a timeless virtue, but it's a horrible investment strategy. The second thing every securities lawyer learns is that business risks are cumulative, and a lot like a leaky roof – unless you can locate and patch every hole, the ceiling will end up in your lap. On the bleeding edge, developers of expensive technologies that can't be implemented at relevant scale for years morph into financial black holes that suck the lifeblood out of portfolios and teach a new generation of investors about an insidious market phenomenon the Gartner Group refers to as the hype cycle. On the leading edge, developers of cheap innovations that ramp rapidly over a few years build thriving businesses that deliver market beating returns for investors. The first thing every securities lawyer learns is that technology is a two edged sword.
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