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Proximate Cause of Climate Change

Human population growth is a proximate cause of climate change. Charlevoix South Pier Light Station, Charlevoix, Michigan USA [Photo: R. Wottrich]

Richard Wottrich, Atlanta USA

Summary

Global warming and climate change are linked to overpopulation.

Developed Economies experience slowing birth rates, leading to less attention given to overpopulation effects.

The earth cannot support its human population today, let alone in 2050, or in 2100.

Air conditioning is on track for huge increases in global energy consumption.

Perception

Charlevoix, Michigan USA, is a tiny wealthy enclave of vacationers in Northern Michigan on the shores of Lake Michigan. It is a truism that as populations of humans in Developed Economies become more wealthy their birth rates decline. Charlevoix’s population has dropped from 3,183 in 1990 to 2,529 in 2016 – a decline of 20.5 percent. These are the rose colored glasses that people of means and ‘influencers’ gaze through in Developed Economies when contemplating climate change and its connection to overpopulation.

That global warming and climate change are impacted by humans is a given. Scientists have done the work and the connection is clear. Why then will nobody discuss the proximate cause of climate change – overpopulation? Humans consume and use natural resources to gain consumption opportunities. The more humans we have, the more consumption we have, the more climate change we have. Why is discussing human overpopulation the ‘third rail’ of the climate change discussion? Population growth and climate change are both geometric. The link is unquestionable.

Too Many Humans

There are 7.4 billion humans on earth today. Over two billion humans have nothing. Over 700 million humans are starving to death at any given time. Leaving the politics of the wealth gap and food distribution aside, earth cannot support the humans it has now. The United Nations DESA report has projected 9.7 billion humans in 2050 and 11.2 billion in 2100. Does anyone really believe that climate change can be reversed in the face of another 2.3 billion humans by 2050? Or 3.8 billion by 2100?

Even the relatively wealthy EU added 1.5 million people last year, growing to 511.8 million at the start of 2017. The invidious facts of population growth insure that the countries with the highest standard of living have the lowest birth rates. Meanwhile Africa, with 1.2 billion humans, is projected to grow to 2.5 billion by 2050 and 4 billion by 2100. Asia and Oceania will be at 5.3 billion by 2050 and the Americas will be at 1.2 billion.

Air Conditioning

Consider just one factor in human consumption impacting climate change – air conditioning.

Air conditioning is virtually a ‘right’ in the U.S. and studies have consistently shown that human comfort is key to productivity. Therefore more air conditioning, means greater productivity, means more energy consumption, means rising global temperatures, means more air conditioning. You could look it up.

But what if everyone wants more air conditioning? They do. Nearly all of the world’s biggest cities are in tropical climates. Well over a billion people reside in mega-cities like Guangzhou (44 mm), Shanghai (26 mm), Bogotá (30 mm), Mumbai (20 mm) and on and on.  A modern city-state like Singapore could not exist without air conditioning. Nearly 55 percent of the world’s population lives in urban areas, which is expected to increase to 66 percent by 2050.

Global sales of air conditioners are increasing at an annual growth rate of 18.5 percent – a trend that expected to accelerate; perhaps by an order of magnitude by 2050.  The U.S. uses more energy every year on air conditioning alone than the total energy consumption of Africa and its 1.2 billion people. The climate impact of U.S. air conditioning on rising global temperatures is roughly 500,000,000 metric tons of carbon dioxide per year.

China, the world’s largest energy user and pollution producer, will surpass the U.S. as the world’s biggest user of electricity for air conditioning by 2020. Nearly fifty million air-conditioning units were sold in China in 2016 and total units in China will double in five years.  However while urbanized China, Japan, and South Korea will quickly approach their respective air-conditioning saturation points, the greatest demand will appear in South Asia and especially in India. A report on the global explosion in air conditioning by Lawrence Berkeley National Laboratory projects that the world is poised to install 700 million air conditioners by 2030, and 1.6 billion of them by 2050.

Much of this is logical and intuitive at the same time. But we don’t know what we don’t know – every baby born adds to the geometry of climate change. Over 130 million babies are born every year, netting after human deaths to a gain of over 75 million new mouths to feed every year – year after year. That is another United Kingdom or another Turkey every year.

Until the climate change discussion takes into account the proximate cause of global warming, no realistic progress can be achieved.

Richard Wottrich, CEO and Senior 

 

DEFCON 5: Opioid Abuse Disorder

Opioids – America’s Tasmanian Devil

DSI White Paper – By Richard Wottrich, CEO & Senior Consultant

June 30, 2017, Atlanta USA

Summary

Over 80% of illicit drug demand in the Americas comes from the United States.

Today’s surge in illicit drug traffic at America’s southern border is driven by drug cartel violence in Central America.

GlaxoSmithKline and Johnson & Johnson legally grow opium poppies in Tasmania.

The United States accounts for three-quarters of global legal opiate painkiller sales by weight and five-sixths by value – thus 4.3% of the global population accounts for 83.3% of painkillers sales.

Global Traffic in Illicit Drugs

Attempting to estimate the global GDP of illicit drugs is akin to getting an accurate vote count in an American presidential election – it brings to mind the uncertainty principal. The United Nations has estimated it as follows, “the global drug trade generated an estimated US $321.6 billion in 2003.” In 2016 perhaps one percent of global GDP is in illicit drugs – roughly $790 billion a year and growing – fast.

Drugs in the Americas

Drug cartels are integrated into Mexico’s economy and government. The major drug cartels operate throughout Mexico and employ over 500,000 people and indirectly support an additional 3.5 million people. Estimated profits for the combined cartels are $25-$35 billion a year. These profits fuel corruption and graft on an international scale. Over 80% of illicit drug demand in the Americas emanates from the United States.

The history of drugs and violence in Central American dates to the 1980s, when civil wars in El Salvador and Nicaragua sent thousands of people north in search of safety. This illegal immigration fed into the gang culture of Los Angeles and morphed into the drug cartels of today – destabilizing much of Central America. Many in the drug cartels are American-born.

John Sullivan, a gang specialist with the Los Angeles County sheriff’s department, said, “These gangs are part of the cultural fabric of the U.S., not Central America. We deport them, and they’re bigger and badder than any gangs there, and they dominate. And now we have areas [in Central America] that are widely destabilized, with a high degree of violence.” America’s own demand for drugs has helped produce the very cartels that arose to meet that demand.

The United States drug market, from Colombia through Central America, has been estimated by RAND Corp at over $100 billion. This supports a vast criminal supply chain that recruits and intimidates hundreds of thousands of people. Children are coerced, acting as lookouts, drug ‘mules’ and any other nightmare you might conjure. The cartels send young teens into the United States, where they learn gang culture in the Latino ghettos of Los Angeles, Chicago and Washington DC. In turn they terrorize entire neighborhoods into the drug trade.

The tiny country of Honduras’ (8 million people) illicit drug traffic exceeds its GDP. Let that sink in for a moment. Over 75% of America’s cocaine is shipped out of Honduras.  As a result Honduras has one of the highest murder rates in the world – 59.1 murders per 100,000 people in 2016 – a rate that if applied to the United States would generate almost 200,000 murders a year. The recent flood of child migrants to the United States from Honduras, El Salvador, Guatemala and Mexico is thus driven by this extreme violence and massive drug-related gang activity.

The Legal Opium Poppies of Tasmania

Over 90 people a day are dying of Opioid Abuse Disorder in the U.S. In total including all illicit drugs, 59,000 to 65,000 people died from drug overdoses in the U.S. in 2016. Where do opioids come from?

Tasmania, roughly the size of West Virginia, is one of the most remote places on earth with a population of just over 500,000. Tasmania is the origination point for the global supply chain that involves the biggest drug companies in the world – producing $25 billion a year of opiate painkillers in the U.S. alone.

Tasmania’s gentle climate, 50 years of plant modifications and an obliging government have produced a near-monopoly on production of one of the pharmaceutical industry’s most important raw materials. Tasmania grows roughly 85% of the world’s thebaine, or codeine methyl enol ether, an opiate alkaloid used to make OxyContin and related powerful prescription drugs that have revolutionized pain management over the last two decades. It produces all of the world’s oripavine, an alkaloid poppy extract utilized to treat heroin overdoses. Tasmania also accounts for 25% of the world’s morphine and codeine, two older painkillers from opium poppies still widely used outside North America.

The value of these narcotic alkaloids to Tasmanian farmers may seem small at roughly $100 million a year, but they support a vast painkiller network that marks up value 150 times at market. GlaxoSmithKline plc (LSE:GSK) ($24.6 billion revenues) and Johnson & Johnson (NYSE:JNJ) ($73.6 billion revenues) control most of this production, providing narcotic alkaloids to their own painkiller divisions and to other pharmaceutical companies worldwide. They are a legal cartel overseen and sanctioned by the United Nations Commission on Narcotic Drugs (CND).

Of special interest is Purdue Pharma L.P., a privately held pharmaceutical company that paid one of the largest pharmaceutical company fines in history in 2007 for mislabeling its product OxyContin. Purdue’s revenues are over $3 billion per year, mostly from the sale of OxyContin.

Most of the opium poppy extract produced in Tasmania is shipped to pharmaceutical factories in the Northeastern United States. The U.S. accounts for 75% of global legal opiate painkiller sales by weight and five-sixths by value – thus 4.3% of the global population accounts for 83.3% of painkillers sales. More specifically, the U.S accounts for 84% of global oxycodone (Oxycontin) consumption and more than 99% of hydrocodone (Vicodin, Lortab) consumption.

There is a human price for this obvious “overuse” of opioid painkillers. Between 1999 and 2016, the number of U.S. drug poisoning deaths per year involving an opioid has risen from 4,030 to almost 34,000, now exceeding overdoses of heroin and cocaine combined. Blue Cross and Blue Shield said recently that its claims for opioid addiction and dependence surged nearly 500 percent between 2010 and 2016. Forbes magazine contributor Robert Pearl, MD, says that 3 in 4 drug overdose deaths are due to opioid painkillers such as oxycodone, hydrocodone or methadone.

Remember one salient fact. The pharmaceutical industry knows and has known for years that it produces far more painkiller doses than are sold legally.

A new opiate painkiller with 5 to 10 times the power of Vicodin hit the market in 2014, and there have been corresponding spikes in Opioid Abuse Disorders. In 2014 more than 40 drug overdose experts urged the Food and Drug Administration (FDA) to reconsider its approval of Zohydro ER [manufactured by Zogenix, Inc. ZGNX (NasdaqGM)], a potent extended release formulation of straight-up hydrocodone, citing the potential to add to the growing epidemic of painkiller addiction.

Andrew Kolodny, president of the advocacy group Physicians for Responsible Opioid Prescribing, was very direct: “It’s a whopping dose of hydrocodone packed in an easy-to-crush capsule. It will kill people as soon as it’s released.”

Measured in human misery one might be tempted to ask, “What is the difference between an illicit and a legal drug cartel?” But that is hyperbole. More interesting questions are, “What is it in American culture that produces this dramatic and pervasive abuse of drugs?” or “What is the pharmaceutical drug sector’s mindset that these companies can continue to sell far more drug doses than are prescribed legally?”

Just as importantly, how long can such an obvious imbalance in legal and illicit drug consumption last? At what point does the entire legal supply chain cartel collapse in the face of abuse and resulting government regulations, or in the destruction of a U.S. middle class capable of affording this habit? How far can pharmaceutical lobbying reach and when will blow back hit their industry?

Richard L. Wottrich, richard.wottrich@gmail.com

Paris In the Rain #laVilleLumière

Paris In the Rain (Photo: R. Wottrich)

Atlanta USA, 24 June 2017

Recent market sentiment is trending optimistic about the French economy, but there is scant evidence to support this view. Much of this jingoism is generated by the election of France’s new President Emmanuel Macron. However, Macron faces the same intransigent bureaucracy that every French president has faced for decades.

Meanwhile the EU is jumping with glee at the prospect of driving the UK down in economic misery for its Brexit effrontery. We have not seen this level of ‘piling on’ since Europe subjugated Germany after World War I. But such venom is misdirected. The EU has lost an important partner and euro zone problems have not improved a wit.

With Germany the runaway economic leader in the EU [German GDP: $3.4 trillion], and with the UK leaving the euro zone [UK GDP: $2.8 trillion], France remains the only other economic powerhouse in Europe [France GDP: $2.4 trillion]. But France is the weakest of the big three. Prior to the big crash of 2008, France’s growth rate was in step with the rest of the EU.  But now France trails the EU trend GDP growth rate of 1.6 percent.

It has taken longer for French productivity to return to pre-2008 levels. France’s per capita income finally recovered to those levels in 2016; compared to UK recovering in 2015, the U.S. in 2014, Japan in 2013, and Germany in 2010. French debt is now close to 100 percent of GDP, while its government spending as a percentage of GDP is among the highest in the EU at 31.5 percent. France’s 10 percent unemployment rate reveals a skills gap that runs deeply across all industries. Unemployment is even worse for French youth, with nearly twenty-five percent of those between 15 and 24 unemployed.

The odds are against growth in France for myriad reasons. Only sixty-eight percent of France’s GDP is in the private sector, meaning that the baseline for economic growth is just $1.65 trillion. Germany’s exports alone total nearly 80 percent of France’s entire private sector GDP! Of France’s 67 million citizens, perhaps 12 percent are associated with North African countries. A significant percentage of these North Africans have not assimilated into the social and economic fabric of France and many are supported by government social spending.

Both Macron and the EU focus on the wrong problems – prioritizing tight money and low inflation, rather than job creation throughout the euro zone. The bureaucrats in Brussels are of course jubilant that Macron won, as is Germany. Things are working just fine for the elites and the mighty German export machine, but significant economic growth in France, when and if it comes, will be infinitesimal and glacial.

“The spectacle of this lovely nation, with its great agricultural wealth and its cultural riches, continually stepping on its own toes, made me wonder if France suffered a kind of national neurosis” ― Julia Child

Richard Wottrich, blog author

 

Amazon’s Rounding Error

Paris Market [Photo: R. Wottrich]

Amazon announced the acquisition of Whole Foods this week, the organic grocery food chain, for $13.7 billion. In Amazon’s world, with a market capitalization of $460 billion and a P/E ratio of 185, this amounts to a rounding error. But Amazon’s annual revenues of $136 billion pale beside Walmart’s $486 billion in global sales. Walmart accounts for 25 percent of total U.S. grocery sales. Average sales per U.S. Walmart store, of which there are 4,692, are $66.7 million.

Whole Foods by contrast had 2016 annual sales of roughly $15.72 billion, just 2.3 percent U.S. grocery sales. Whole Foods’s average sales per store, of which there are 430, are $36.6 million. Amazon already has roughly $15 billion in on-line food and beverage sales, so the purchase of Whole Foods could take Amazon grocery revenues over $30 billion, which puts them in the top five of the fragmented U.S. grocery market. But at what cost?

Amazon’s primary focus is the Whole Foods chain of 430 stores, which brings an established grocery distribution network to the Amazon on-line juggernaut. Whole Foods stores are in upscale demographics that match many of Amazon’s targeted demographics. From this perspective, Amazon is plugging the Whole Foods bricks and mortar stores, plus its database of customer preferences, into Amazon’s well-established on-line empire to gain market share in the grocery industry. Using the Whole Foods distribution network in conjunction with Amazon’s on-line scale should drive costs and price points down and capture market share.

Is this a smart Amazon acquisition from that vantage point? The average cost to open a new Whole Foods store is roughly $7.5 million. Amazon’s purchase price works out to about $32 million per store; a premium of $24.5 million per location. Amazon could open its own store/distribution centers of course and they probably could build them for far less than $7.5 million each.

If Amazon’s main premise in acquiring Whole Foods is to expand its distribution network to drive its online grocery business, the $25 million premium per store would appear to be much more than a rounding error.

A recent report by Food Marketing Institute and Nielsen Online projects that American consumers could spend $100 billion on food-at-home items by 2025. Just how much of this $100 billion can Amazon capture? And how much of this captured revenue will be cannibalized out of its own Whole Foods chain?

Conclusion: Amazon overpaid for Whole Foods. But then, they can.

Blog author: Richard Wottrich

 

What is Reality?

Paris (or is it?), [Photo: R. Wottrich]

“Animus in consulendo liber,” Free spirit to decide, Cato the Elder (234-149 BC), Motto of NATO

What is reality? Is the photo above a photo? The elephant is a plastic 3D printed figure. The gladiator is video streaming via Netflix. The backdrop is projected. The manikins are positioned to emulate a crowd. Or is it a smart phone image processed by an Intel chip?

The Technological Singularity is usually espoused as the supposed triumph of artificial intelligence (AI) over humans. In this definition AI ‘evolves’ via repetitive self-improvement. AI becomes capable of replicating ever superior iterations of ‘itself’ and coordinating that ability with other machines and robots. But is the Technological Singularity that point in time when humans perceive and believe that they can no longer control AI ‘evolution’ and indeed are subservient to AI?

The Cloud = humans aggregating demand = point-to-point distribution = the surrender of individual autonomy to a collective technology matrix = equals less human control. Ergo the Technological Singularity and our fear thereof.

Technology is accelerating vis-à-vis Moore’s Law headlong directly at humanity racing from the opposite direction to remove risk from everyday life. The point of impact is the Singularity.

As technology advances rapidly the entire concept of data centers will change, as Cloud systems leap into satellite networks, electricity transmitted by air, use of light instead of electricity in computers, and into quantum bio-computing systems emulating the human brain. The iterations are unknown unknowns. To think we can control this evolution is a particular conceit of humans.

Benjamin Franklin wrote the following singular observation for the Pennsylvania Assembly in its Reply to the Governor (November 11, 1755), “They that can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety.”

A Moveable Feast #DSIGlobal

Musée Picasso Banner, Paris, 2003 [Photo: R. Wottrich]

“I do not know what I thought Paris would be like, but it was not that way. It rained nearly every day.” Hemingway, from private papers in the collection of the John F. Kennedy Library

The result of the May 7 presidential election in France was the victory of the centrist liberal Emmanuel Macron. He was employed from 2008 to 2012, by the Rothschild & Co. investment bank, which is the equivalent of Goldman Sachs in elitist circles absent a family heritage stretching back centuries. Macron was known there as a rainmaker – nicknamed a “Mozart of finance.” His primary skill lay in reaching out to potential clients within his own elevated circle.  Which is to say that absolutely nothing will change in France over the next five years that threatens that elite circle in any fundamental way. Which is to say that the European Union will continue on its present track, enabling Germany to dominate the entirety of Europe.

“If you are lucky enough to have lived in [the French elite] as a young man, then wherever you go for the rest of your life, it stays with you, for [the French elite are] a moveable feast.” Ernest Hemingway 

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