The End Of The World Is Just The Beginning

Physical Copy:

Audiobook:

By: Peter Zeihan

Rating: A-

This is the second book I have read by Peter and his most current book. The title is ominous but refers to the forthcoming changes to the globalized economy due to global demographic collapse. 

Most countries have been well below the replacement rate of having kids for 3 decades. While at the same time, people are living longer and the elderly population is growing. This puts tremendous pressure on state programs that are supported by the labor of the younger generations. 

When there isn’t enough productivity to support the system, it collapses. That collapse can take many forms. This book is articulating the most likely events of that collapse and what the world looks like rising from those ashes.

Peter’s takes are fascinating and contrarian! My favorite two points were:

1. Renewable Energy is for those who can’t do math. And…
2. Globalization Caused Hyperspecialization.

Renewable Energy is for those who can’t do math.

Solar Energy:

Requirements:

• Regular Sunlight
• Nearby Usage
• Transmission Infrastructure
• Cheap Capital
• Rare Minerals

You need regular sunlight for this to make sense. And then you need your population to be located nearby said sunlight. There are only a handful of places in the world that have collocated regular sunlight and dense populations.

The United States has the majority of those locations with the California Coastline and the Southwest US being the major locations.

What does that really mean? Due to sunlight availability, solar panels in New York would generate 25% of the power as the same panels in Colorado. Because of this, most of the world would generate more carbon manufacturing the panels than they would ever save by using them.

We need innovation in the panels. We need panels that capture more energy.

Wind Energy: 

Requirements:

• Consistent strong winds
• Nearby Usage
• Transmission Infrastructure
• Cheap Capital
• Rare Minerals

As with solar, it is rare to have good wind near a major metro. Most of them, again, are in the US.

Ideal Large Cities for Wind Energy:

• Chicago is one of the rare exceptions.
• Denver
• DFW (Great opportunity to for solar and wind)

Not Ideal Cities for Wind Energy:

• New York
• Toronto
• Berlin
• Paris
• London
• Moscow
• Beijing

The problems with wind are similar to solar. Without consistent strong winds, you generate more carbon manufacturing the windmills than you save by using them.

We need innovation in the transmission of that electricity from where it is generated to where it is used. 

Transmission of Electricity:

For the large cities that don’t have abundant sunshine or wind, you need to be able to transmit the electricity 100s of miles away.

This requires very expensive high voltage transmission lines. Most of which are not used in the US. Also, this will require a unification of utility regulations across regions. These regulations are entrenched within the regional economies and changing them would require SEVERAL acts of Congress and a TON of lawsuits. This gives localized markets a competitive advantage, like Dallas/Fort Worth.

Raw Materials:

What is not factored into the financial models of renewables at scale, is the harvesting and processing of the raw materials AT SCALE. Going renewable at scale is a really really big undertaking. From 2014, when the solar boom began, until 2020, solar has only increased to become 1.5 percent of total energy use.

Materials Used in Renewables:

• Chromium
• Copper
• Aluminum
• Fiberglass
• Graphite
• Lithium

There are not enough of the materials on Earth to implement renewables at scale. Read that again.

We need innovation in the materials used.

Capital:

We need A LOT of capital to go green. The problem with renewables is that you pay for 80% of their costs up front. Whereas other energy sources use little by little as they go. This allows them to pay for their costs from the revenue from the business, which makes it more viable from a capital standpoint.

The US age demographics aging makes financing far more expensive. We have more 60+ year olds with money in CDs and a smaller population younger than that with money they can invest in the markets. This makes capital less prevalent and therefore more expensive.

Renewables don’t make sense…

Like I said, renewables are for those who can’t do math. They don’t work…yet. We need innovation at every level of the business model. 

Globalization Caused Hyperspecialization

Deglobalization is coming due to demographic collapse. Almost every major country has far more aged people than younger generations. Populations will shrink and economies will collapse. The global supply chain will be dramatically affected by this.

Therefore…

Countries will begin producing as many goods as possible for themselves back home.

The problem with this is that globalization has caused the entire global supply chain to hyper specialize. Meaning, everything is manufactured or grown in the most efficient geography possible. For example, Taiwan in semiconductors, Brazil in soy, or Germany in machinery. In large part, those goods are not manufactured or grown at scale anywhere else in the world. They have built their entire economy, legislation, and education around those industries. They make them better and cheaper than anywhere else in the world.

When countries begin growing or manufacturing new products, they will be more expensive and not as good for quite some time.

Global trade will still occur but the dependability of the supply chain will not be what it was. “Just in time” manufacturing will not be reliable. So companies will have to warehouse larger levels of goods and/or ramp up 3-D manufacturing. There will be opportunity in the warehouse real estate space with the US Warehousing and Industrial Complex needing to double to support the current US population.

The scary part about the world having to grow their own food close to where they live is, many will starve and will not survive. Yikes.

Conclusion

Deglobalization is inevitable due to demographic collapse. This is what the title refers to. It will be the end of the current version of the world. The US and more specifically, the Texas Triangle, is better positioned to weather the storm than anywhere else in the world. There will be change. There is opportunity in change. You just have to know where to look.