Monday, November 12, 2007

Markets Trump Freedom Every Time

Even Nobel Prize winner and ex-VP Al Gore found the venture capital market seductive enough to follow the siren's call. He joined two other friends in a series of green investment schemes. One is a Silicon Valley venture capital fund and the other arose from Al & Bill's excellent London adventure three years ago, a $1 billion "sustainable" investment fund.

Mr. Gore reflects the new Democratic Party that opened its campaign trough wide to corporate donors, except Al is clearly on the giving end. at least for the moment. Consider several things he said in the Fortune article:

In the long term, though, they want to help drive something much larger, "bigger than the Industrial Revolution and significantly faster," as Gore puts it.

"We all believe that markets must play a central role."

How do these apply to past mega-shift events, fire, electricity and the internet? It seems all three developed without markets playing any kind of role. As a pre-historic discovery, the ability to make fire at will likely helped the whole tribe. Those indigenous people may or may not have bartered, a rudimentary market.

Electricity in nature was discovered by Ben Franklin. It was his hobby. One of America's founding fathers did his work because it was interesting to him. This leads to the development of the internet. The interconnected network of computers started as a means to allow researchers to communicate with one another. It morphed into a huge market some twenty years after its initial creation.

History shows people make unique discoveries more from an interest in learning, more from the diligence of pursuing their life's mission. Markets can accelerate or bury these discoveries. Recall the recent discovery of "burning water"? A scientist passed a radio frequency wave through salt water. The vibration caused the hydrogen to separate from the oxygen in H2O, enabling the gas to burn.

What existing markets will crush this discovery? The five biggest oil companies make a combined $100 billion profit. The political market allows such firms to buy influence from our elected officials. The sword of regulation can just as easily swing to close a promising new discovery, protecting entrenched market leaders.

"Something bigger than the Industrial Revolution and much faster" involves major new paradigms. I guarantee "the market" won't do the actual innovating. A creative person or innovative team will make the potentially world changing discovery. If they're like their predecessors, they'll offer it free to humanity like Jonas Salk. If they're more like Al Gore and his band of green (money) worshippers, then expect a new OGEC, the Organization of Green Energy Companies. They'll set the price on carbon trading, decide how much to charge for a barrel of french fry oil, and lobby to keep that radio frequency in the government's permanent vault.

My guess is people want things to flip soon. I for one am tired of $3 a gallon gas, high electricity bills, and ever rising air fares. Texas has "free market" electricity well above the national average. TXU just took on a boatload of debt in its acquisition by private equity firm, KKR. A local San Angelo hospital did likewise when Triad sold to Community Health Systems. It seems markets and their associated buyouts add costs for the customer to bear.

Al can promote his newest money making venture, but I get to wonder what happened to switch our country's focus from guaranteeing freedom to worshipping free markets. Free people can make world changing discoveries. Those kowtowing to the altar of free markets know to keep purchasing, otherwise their god will fall.

Yet, markets do cycle and the world is due for a crash. From the debris will likely come major changes. Let's hope its not the Reaper.