Wednesday, April 27, 2011

A Few Notes on Personal Strategies around Peak Oil

There is a whole genre of advice on peak oil sites for how to deal, at a personal level, with peak oil, most of which is so inane that I have tended to steer clear of the whole subject.  Things like gardens, solar panels, etc, can be overemphasized.  I also am wary because everyone's situation is completely different and so there's a limited amount of advice that really generalizes.

But this morning, I feel inspired to offer a few suggestions, mostly with a focus on the situation in the US, and focussed on people in the struggling middle.  They may only be worth what you are paying for them.


1) The challenges of coming decades do not consist only of peak oil, considerable as that is.  On the contrary, long standing trends like globalization, outsourcing, and technological displacement of more and more occupations will continue at the same time.

2) Industrial civilization is tough, much tougher than it looks to some people.  It will be around for quite a long time, and it will maintain control over most of the resources, ugly as that may be at times.  It's a fact of life, you didn't make it that way, but you better figure out how to work with it.

3) Keep a very clear focus on Maslow's hierarchy:


The basic insight here is that if you don't have the bottom layers securely under control, don't put much if any of your energy into the top layers.  The top layers are the stuff you focus on more after the basic stuff is reasonably well taped.

In the mid twentieth century, unprecedentedly large numbers of people (especially the baby boomers) were able to focus relatively high up the pyramid.  Fewer people will have that luxury in the next couple of decades.  I don't think Gen Y has realistic expectations yet.

4) In particular, for most people the absolute #1 focus should be on employment (or on the business, for the self employed).  This is the critical trend:


That's the fraction of males employed, age 25-54, from 1950 to the present in blue.  The red line is roughly what I expect to happen next - it might continue to improve for a bit, until the next recession hits, and then it's going to take another step down, and recover very slowly after that.  (Obviously, the exact timing and size of the step down I make no claim to be able to forecast - this is just a qualitative indication of what I expect).

For most working age men, the overwhelming priority is to stay in the 75%, and not in the 25%.  If you lose your job, or your business goes under, and you can't find another option in a reasonable period of time, your life will fall apart and no other preparations you made will matter much.  It's going to get harder and harder to find and keep a job.  What this means is highly variable from person to person, but some general notes:

a) Work your ass off.  There's a reason the protestant work ethic was invented - it's a proven way for members of a civilization to survive tough times.  A friend of mine was born in a village in the third world with no electricity or running water, had to walk ten miles to high school, and is now a senior engineering manager in a Silicon Valley company.  I asked him what he had learnt from his extraordinary life journey.  His reply: "Work. Work. Work.  Night and Day.  If things go well, work.  If things go badly, work."  Great advice.

b) Make sure you are adding value.  Be extremely clear on why your boss (or your customers) need you.  Make sure there is some margin there.  What this means is different in every job.  For a technical professional, it means periodically delivering excellent work that makes a difference to the organization you work for.  For a waiter, it might mean hustling and smiling for every customer, so that the shift manager wants you again, and the tips flow.   Don't make any enemies you don't have to make, and make strong relationships wherever you can.

c) Have options.  If your boss fires you, know what your plan B is.  Make sure your resume, training, etc, etc, is such that there are going to be other people that need/want you.  Maybe this means nightschool, maybe a relocation, but something.  If you work for the only decent paying factory in town, don't assume that it's going to be there forever.  In general, it's better to go through life assuming that no-one owes you a job or a living, but be prepared to hustle and strive for one.

d) Don't screw up.  Easier said than done, believe me, I know.  But the consequences of mistakes are getting more serious.  Whether it's goofing off at school, drugs, alcohol, unwise career moves, expensive liberal arts degrees in something you aren't absolutely passionate about and talented at, non-functional romantic partners, the consequences of mistakes are rising and will continue to rise.

e) If you do screw up, don't give up.  Learn from your errors, work harder, keep trying to make something happen.  Don't let pride get in the way of doing what you need to do to survive.

For women, the advice is pretty much the same if you are pursuing a career, but the option of being supported by a partner is more open to you.  If you go down that road, be extremely certain your mate is hard working, functional, and loyal.  Keep him happy, and keep an eagle eye on him.

5) Live conservatively.  Spend less than you earn.  Buy much less house than the bank is willing to lend on, and, obviously, don't assume it's going to appreciate any time soon.  Live in a smaller apartment, or double up with roommates.  Do your own repairs/cleaning/etc.  Don't go in for lavish furniture/vacations/remodels that you can't really afford.  This goes for things like solar panels, Chevy Volts, and geothermal heating systems too.  If you can really comfortably afford them, great.  Otherwise, find a cheaper low rent alternative.  Losing your job and having to live on your savings is about 100X more likely than the grid failing.  Drive a fuel efficient car, or a scooter, or a bike.   Arrange your life so that if the government has to ration gasoline one of these years, you can still function.  Exercise and eat well to reduce the odds you'll need medical care you can't afford.  Pay off your debts as fast as you prudently can, and then save, save, save.

6) Don't get arrogant.  If you've thoroughly solved all the above problems, don't assume they will stay solved.  History is full of stories of wealthy folks who lost everything in some crisis or crash that they failed to anticipate or properly manage.  One formerly wealthy branch of my family lost everything in the panic of 1873.  Diversify your assets.  Focus on preserving what you have rather than risky schemes to get a lot more.  Read obsessively and understand what's happening in society so you can position yourself best for it.

That's about all I have to usefully say - everything else is too situation specific.

27 comments:

bordoe said...

Stuart: Here's where you and I may have to part ways, although you hold many good reasons for your eminently reasonable position.

It comes down to the question of why you want to be part of the industrial world system to begin with; or more accurately, why you want to be used ("worked") by the system for longer than you have to.

For most people, their world view, their "non-thought of received ideas" is a self imposed box; the box of their house, the box of their car, the box of their cubicle. Add to that the box surrounding their many degrees and credit reports. Might as well be made of concrete and steel.

They only know what's inside the box, and have so long felt protected by the boxes they have no idea what to do outside. They fear the 'outside' as they see they'll lose their other boxes soon if they fall out of one.

The horror! The horror!

My take? Get the hell out of those boxes as soon as you can! They're the CAFOs of humanity!

Work in the US; buy a cheap apartment complex in Chile or the Philippines (or your home country, or a country you understand) to live yourself, or to rent out.

Do the same in the US; instead of buying a 'nice' house in 'nice' school district for which you have to mortgage 30 years of your life, buy a multifamily property (up to 5 units on an FHA loan) and home school. You'll pay off the debt in 10 years, have a positive cash flow and an EDUCATED (as opposed to SCHOOLED) child.

Live off the system, dont let the system live off of you!

bmerson said...

"For women, the advice is pretty much the same if you are pursuing a career, but the option of being supported by a partner is more open to you."

Interestingly, NPR had a story this morning reporting that women now outnumber men in earning advanced degrees. A commentator wondered whether this was the beginning of a societal paradigm shift, resulting in more women being qualified for and taking on leadership and power roles and more men at home with kids. So, perhaps the advice actually works both ways. ;-)

Mr. Sunshine said...

Well written, Stuart, though someone's really edited Maslow's Pyramid (or at least the graphic on Wikipedia that you're using) since I covered his work a few decades ago in college intro-psych class. Sex lived on the bottom level on the charts back in the day. Love was not "sexual intimacy" on level three, it was love - which does not require sex; ask any child.

John said...

As regards (a), work your ass off, I would add 'for as many hours as you need for a healthy work/life balance'. In my case (UK) that's 36.5 per week. My boss knows I'm above average hard working and diligent when I'm on the clock, but after that, my time's my own (to move further up Maslow's hierarchy).

On reflection, both at work and away from it, I aim to be in the higher realms (of the pyramid). Nice work if you can get it :)

James said...

With respect to the advice to "save, save, save" I would point out that in times of hyperinflation those deep in debt tend to make large profits, and those with the most savings tend to lose them all. The later is true of all sorts of economic crises.

I am not suggesting that living beyond one's means is the best way to prepare for peak oil - just that one should be shrewdly diversified and not trust the powers that be. One thing I think you can be certain of is that if a huge economic crisis is looming both the government and the mainstream news media will be giving everyone bad advice about where they should keep their money.

Lesson's from German Hyperinflation:
http://www.ritholtz.com/blog/2011/04/lessons-from-the-past-%E2%80%93-the-german-hyperinflation/

Pro Magnifico said...

Good advice. I'd add, "don't go to law school." But maybe that qualifies as an expensive liberal arts degree.
One question/observation: Does your advice necessarily imply that, whatever risks to global civilization you analyze on this blog, your overall conclusion is that global civilization will roll on, and in the same hypercapitalist industrial mode it currently operates in?

rks said...

Yes, but: If we want everyone to save (we do) then we need to work out how society as a whole can save. Society as a whole can't save money.

Here's a thought experiment to get one in the mood. Suppose it seems that immortality is around the corner. The government announces that everyone over 100 will be forced to leave the planet: "Start saving now: it's expensive up there". Everyone saves. Economy collapses. How should this have been handled?

Pops said...

Thanks Stuart, I've been posting on one of "those" sites for over seven years and planning for the future has always been my thing.

I have Five Rules for PO Prep (google it):
Don't Buy
Don't Borrow
Don't Specialize
Don't go Hungry
Don't be Dependent

Learning how to be happy with less and not putting all one's eggs in one income basket I think should really be the main focus of "preparation".

Unfortunately those are items not available in nitrogen packed buckets. ;^)

bordoe said...

>Yes, but: If we want everyone to save (we do) then we need to work out how society as a whole can save. Society as a whole can't save money.

It can and it cant.

"Saving" is a total farce of an activity, as it's just someone else consuming it instead of you. It's not being 'saved'; put another way, the economy can only exist one moment at a time, and our placing of time based rules (interest accruing per diem, etc) on it is an arbitrary human activity.

So when these things (credit/bonds) get 'wiped out' as during the hyperinflation noted by James, or a financial 'panic' (really just a realization of folly) that Stuart noted, it's not like anything 'real' got wiped out. Although, I realize this is hardly consolation to those who 'lost' it all.

I think what 'savings' in much of the industrialized world has devolved into is 'promising'. Namely, the big promise that somehow, collectively, people are infinitely wealthy; or at least infinitely credit worthy.

It's not true.

James said...

I think that there are different modes of saving, and that some will prove to be more effective than others.

For example, if I buy and hold on to bonds issued by a government that eventually defaults completely on its debt - that attempt to save will fail.

But if I invest/hold-shares in the construction of a hydro electric damn that will provide economic benefits over time then that attempt to "save" should prove successful. In other words, for a society to successfully support more savers than borrowers the extra saving must be done via investment in infrastructure and capital projects.

I am interested in what happens when a large proportion of the population all tries to save at once. My tentative theory is that a successive series of ever larger asset bubbles appear and then pop, and (while this is a kludge) I think one can view governments that take on too much debt and then subsequently default as a special type of asset bubble.

bordoe said...

>I am interested in what happens when a large proportion of the population all tries to save at once.

Normal market mechanisms prevent this most of the time by simply reducing return rates to a low enough rate discouraging savings/investment and encouraging consumption.

>But if I invest/hold-shares in the construction of a hydro electric damn that will provide economic benefits over time then that attempt to "save" should prove successful.

Hardly. Look at rail road bonds, or municipal bonds, or canal bonds, or other types of infrastructural investment bonds (many from the 19th century when there wasnt an implied government backing).

They've lost as much value and are as vulnerable to overbuilding and over enthusiasm as tech stocks or exurban houses.

0-0 Some speculation 0-0

Human societies that create excess production (beyond what is required to live on a day to day basis) will ALWAYS create bubbles because they'll always allocate their current production in SOME ways that isnt optimal or really 'callable', and in societies (like industrial societies) that routinely produce vast excesses, the vastness of capital allocation insures leakages and self-induced (what Soros calls 'reflexive') bubbles.

I think this can be seen as far back and as clearly in 'gifting' cultures where one tribe 'gifts' to another in expectations that they will be 'gifted' back when they need it most.

Sounds like a mechanism (imperfect as it is) to smooth consumption over time to me; and that sounds tremendously like savings.

Susan Kraemer said...

One disagreement. If you live in a state where solar is cheaper than utility electricity, as I do (california) then you are crazy not to switch to solar, because it lowers your exposure to rising energy costs (gas supplies a lot of california electricity)

Even though our solar is grid-tied (we use the grid as our 'battery' - making an excess during the day, drawing from the grid at night, coming out even) we have essentially prepaid for our power for at least 40 years, and covered it with $10,000. Our savings amount to about $60,000.

Even though grid power

J.D. said...

Yes, this is a great post. I like Pro Magnifico would also like you to comment on this issue. Although personal opinions don't necessarily count for much, do you see industrial civilization more or less sticking around for a while, albeit with much higher levels of dislocation and uncertainty for many more people, i.e. with a generally lower standard of living and lots of shocks and tremors?

jemand said...

The best advice that probably the fewest number of people are really going to want to follow is: Don't have children. It will be easy enough, to take care of yourself in the future, compared with taking care of both yourself and a child and coming to grips with the kind of world you brought your child into. And the things he/she is going to have to deal with long after you are gone.

Besides, it seems to be one of those things much higher up on Maslow's ladder, more to do with fulfillment than basic survival.


But most people will probably eventually want to have kids and ignore this.

buck smith said...

You make some great points that are timeless and true regardless of where the economy goes. In my opinion you are way too pessimistic about the ability of the capitalist economy to provide solutions to peak oil. Oil may be a limited resource but human ingenuity is not a limited resource.

bordoe said...

>Oil may be a limited resource but human ingenuity is not a limited resource.

Stupidity and entropy are huge forces.

We built ourselves into a sprawl scape. We built it (and financed it to the hilt) on the assumption of continual supply of relatively inexpensive oil.

If that breaks down (especially the continual part); the whole financial system blows chunks in an instant, practically, as interest streams based on retail, labor income, etc all come to a halt.

That wipes out a lot of nominal wealth being serviced at the moment, and will cause the state interventionists at the Fed/SEC/etc to (again) blow all sorts of fuses trying to change the rules in the middle of the game to stop the whole thing from coming apart; at least, coming apart at THAT moment in time.

Eventually however, such intervention, which never creates wealth, meets the bigger reality of the physical world; entropy.

Things fall apart, and it takes a lot of energy to keep things going.

And that energy cant be created out of will power or government fiat.

Capitalism may survive, and will adapt, but it still wont be pretty.

Hal said...

I'm with Bordoe (comment #1.) I started out to NOT be a part of the environmental holocaust, and ran into Peak Oil as a result of my studies. why would I want to be more a part of it now than the minimum I have to be? I say, "Bring it on!"

buck: "...human ingenuity is not a limited resource..."

And that ingenuity is almost 100% bent to the task of piling up higher levels of complexity and waste, optimizing personal enrichment at the expense of others, and destroying all that is life-supporting in the world. Or, as Kurt Vonnegut put in a lot fewer words, (one, actually, but he had to use it three times): "Busy, busy, busy..."

Kenneth D. Worth said...

Stuart, this is, of course, a very interesting subject. One wonders whether humans are now any happier than they were in any of a dozen previous epochs. Probably not. When I think of Generation Y, I think of a group of people who will be able to commit themselves to a great project, the making of a new world; that sort of thing is, at least in my eyes, so much more valuable and enjoyable than the mere piling up of physical possessions. They are in the view of The Fourth Turning authors Straus and Howe a generation of heroes. At the end of the day, we can live on very little if only we have something in which to believe and friends with whom to work to make our dreams a reality.

buck smith said...

There is just too much technology and brain power in the world for "peak oil" to limit economic growth for an extended period. One or more breakthroughs will happen. I am not smart enough to know what they are, but I don't take that personally cause no one is.

But something - oil or gasoline from algae, natural gas to liquids, nuclear power from Thorium to liquids , maybe solar to liquids or something else will happen. And the force that will drive it is capitalists trying to get rich. Lots of them will fail. But the ones that succeed will enrich us all.

I don’t think this will take 20 years. I would be surprised if it takes 5 years.

bordoe said...

>There is just too much technology and brain power in the world for "peak oil" to limit economic growth for an extended period. One or more breakthroughs will happen.

Oil prices have gone from $8 (1998 low) to $140 to $120 ish for Brent.

What massive technological breakthroughs has this rather substantial and decade long price increase brought?

Hybrids?

As John Micheal Greer notes in his blog, this belief that a mysterious 'they' will come up with a technology at the last moment is pervasive in modern society, but is usually held by people who are doing absolutely nothing to advance said technology.

Reality is; hydro-carbon bonds are not freely available in nature in unlimited quantities.

Sucks I know.

The fact that we've been using it AS IF they were unlimited doesnt make them so, and the fervent hope that this state of affairs continues is hardly a plan.

Steve From Virginia said...

Whether one is an insider or not the advice is about the same. There is going to be less of everything so everyone has to learn to live with it.

- Get rid of the TV. That's always the 1st step.

- Get rid of the car. It's gone anyway, why prolong the agony.

- Learn how to get along with strange people. Good lord everyone is so strange ...

- Become a veg. Forget the meat and you will @ least have some animal friends out there somewhere.

- Get out of debt.

- Learn how to entertain yourself. Write a book, paint or draw, learn how to sing or play an instrument. Get rid of the (energy guzzling) toys.

- Learn a trade. No, the world does not need any more advertising managers but a decent carpenter is always in demand.

- Get tools, get rid of the 'stuff'.

- Make friends and influence people. Don't suck up the rich bosses (Stuart). Give them the finger and don't look back. When times turn they will simply try to kill you.

buck smith said...

"hydro-carbon bonds are not freely available in nature in unlimited quantities"

We are not limited to hydro-carbon bonds in creating new sources of energy. But hydro-carbon bonds are being created continuously all over the world from solar energy by trees, grass, algae etc. Smart people trying to get rich (aka capitalists) are already designing new organisms to create hydro-carbon bonds faster and more efficiently than even the fastest and most efficient "natural" organisms.

TiradeFaction said...

I have a few suggestions myself.

Not *quite* an individual strategy to cope with the problems hitting us in the 21st century, but one that would work well if done right. Get (re) involved in the political system, like Americans used to during our most prosperous era(s). Join political action committees, interact with political parties (and don't limit yourself to just the two standard choices!), get involved in initiative runs (If your state has that thing), and so forth. It could very well make life for you or your kids easier in the long run.

And another one, learn to become a jack of all trades electronically. Learn to dissemble a computer and put it back together, learn to fashion spare old electronic parts to build newer functioning devices. Learn to program. Douglas Rushkoff has some good pointers in this regard.

And invest in some solar batteries, and try to purchase devices that can emulate (at least somewhat) the functions you use electronically around the house with solar batteries, or even crank power. A fan and a laptop can both fit this description.

bordoe said...

>But hydro-carbon bonds are being created continuously all over the world from solar energy by trees, grass, algae etc. Smart people trying to get rich (aka capitalists) are already designing new organisms to create hydro-carbon bonds faster and more efficiently than even the fastest and most efficient "natural" organisms.

How does it get converted from plant material to a machine usable form?

Ethanol does it by turning the food portion into fuel. It seems to work well, but uses up food to fuel our cars.

Cellulosic ethanol does it by turning the stock portion into fuel, and we've been working it on it for a while now and no real progress has been made. At least as far as I know. Certainly no production facilities of note.

Algae biofuels sounds promising, but the last company that tried it has massively overinflated costs and it did not work for them.

--

Could any of these, or other, technologies, be the 'solution'?

Maybe, although as noted, there seems to be rather substantial technical hurdles given the fact that they've been working on it for a while and it hasnt really worked.

--

How about a different solution? All solutions that are technically feasible NOW.

How about building more walkable cities? More bikeable cities? Installing solar water heaters to heat homes, weatherization programs for all homes, but first concentrating on those that use heating oil for heat?

How about using the tremendous money directing powers of government (Fannie/Freddie/FHA/Agri-loans) to move away from single family detached homes and towards higher density?

Or on the farm from mono-culture crops that destroy the soil and require huge fertilizer inputs to a soil building, local product generating methods?

Why dont we back those with our political dollars instead?

--

I think the ultimate problem with the idea of technical solutions is exactly as other have pointed out; the absurdity in our society is NOT that we cant continue our way of living, it's our expectation that this way of living will continue.

Paul said...

My God what a depressing list! Work hard for your corporate masters and view your co-workers and the rest of humanity as competitors for the master's favor. The rich executives sitting in their lavish offices will love these suggestions.

This is not to say that these are not appropriate suggestions for the majority of us (me included!). Maybe following these will be the only way for most of us to survive.


But really, Stuart, don't you sometime want to get the tumbrels, pitchforks, and guillotines out and kick some plutocratic backside? Many of them do deserve it, you know. And it could be an alternative strategy to take in the future while our dying industrial civilization stills holds on.

Who knows maybe after the initial nastiness this path will take us through nicer places than the path of corporate servility and working hard for the benefit of a tiny elite of money-grubbing troglodytes.

Hypnos said...

The Economist has a piece of this:
http://www.economist.com/node/18618613

They claim it's mostly low and unskilled workers in the manufacturing industry that are shaping this trend.

There is a graph with an international comparison. The US is the worst performer by a full 5%. Japan is the best. Still a worldwide trend.

evilref said...

Live conservatively is fair enough, but not financially: being debt free is one thing, but reducing reliance on the things that come from oil is the key.

So yes, we are off-grid and fine, but our major step was to reduce our energy usage to about a kWh per day. Then the solar panels and windmills to keep us self-sufficient cost hundreds, not thousands.

Saving money is pointless, because the money is just paper. The trick is to spend money on things which will hold value. We bought good farmland.