This is Part One in a series of six blog posts reflecting on The Third Industrial Revolution: How Lateral Power is Transforming Energy, the Economy, and the World, by Jeremy Rifkin (2011) as it relates to the topic of Entrepreneurial Innovation.
I’m trying not to get too lost in the weeds here, since the class is called Entrepreneurial Innovation, not Global Energy and Financial Systems. When I began reading The Third Industrial Revolution, I realized I had consumed many of Mr. Rifkin’s articles and probably excerpts from this particular work as I bore into the rabbit hole of the global financial crisis of 2008 in real time. I consider myself not just a bit of history buff and it always annoys me that we have to wait 10 or even 50 or 100 years to figure out what actually happened. Just using internet sources from my basement computer in Oregon and hundreds of hours of research, I reached the same conclusions as Michael Lewis in his best-seller The Big Short, which came out about the same time as The Third Industrial Revolution.
Both Rifkin and Lewis make persuasive arguments about the actual causes of the crash. Lewis pins it on some rogue bankers working a loophole in a system far too centralized to serve any greater good than the enrichment of a few already wealthy individuals. Rifkin concludes that “the credit bubble and the financial crisis didn’t occur in a vacuum.” (23) Rifkin defines revolutions and epochs by their primary energy source and argues that we’re currently living through the death throes of the Second Industrial Revolution powered by fossil fuels. But no matter how much drilling, fracking, melting of Arctic reserves, or praying the owners of this technology might do, oil is a finite resource and we are using 3.5 barrels for every new barrel we find. Rifkin defines the nexus between energy and finance by pointing out that since this became the new energy calculus, American household debt has increased from net savings in the 70s to 83% of income in 1990 to 130% by 2007. (22) And just yesterday, the Federal Reserve reported that it’s reached a new record of $13.15 trillion. The economy heats up, oil consumption increases, the price of oil reaches a peak of $150/barrel, everything gets too expensive and the economy crashes again, the price of oil drops again. It reminds the history buff in me of the last Guilded Age of boom and bust economy.
Rifkin’s arguments come second nature to a good Berniecrat like myself. Mankind currently suffers from wealth concentration primarily caused by the centralized nature of our primary energy source, fossil fuels, which we continue to rapidly deplete at our own peril. And while we’re depleting those resources, they continue to exacerbate the serious degradation of our environment due to global climate change. The science journal Nature puts that number at $60 trillion so far assuming the problem actually starts getting solved. For reference, the entire global economy in 2012 was $70 trillion. No one seems to be adding this number to the price of a gallon of gas.
If you asked me in 2011 if Rifkin’s conclusions and predictions were sound, I would have recited every one in order as established fact. Hindsight, of course, is 20/20. He dismissed hydraulic fracturing (fracking) due to it’s impossibly high costs–which didn’t stop a lot of foolish investors rushing in when oil was still selling for $150/barrel. These enlightened investors (many of them too big to fail banks playing with house money) found their wallets a lot lighter when OPEC raised its production numbers and drove oil down to $30 (an action most likely aimed at putting the fracking and oil sands competition out of business, which it did). It’s now climbing again, as Rifkin predicted, trading in the $60 range today.
Rifkin doesn’t apply pollyannaish optimism, just a cold hard pragmatism. Change or perish. Decentralize, democratize, open up more solutions using new and distributed energy including harnessing the energies of billions of individuals looking for a way to involve themselves. A wave of Everyone will wash over the old guard and their failing fossil fuel and debt model with something impossible to control centrally using clean energy and the decentralized communication structure of the internet.
The need, motive, and opportunity in place, let the innovations begin.