Some Chicago Boyz know each other from student days at the University of Chicago. Others are Chicago boys in spirit. The blog name is also intended as a good-humored gesture of admiration for distinguished Chicago School economists and fellow travelers.
Last night I went to see one of my favorite bands, Electric Six, at Dante’s in Portland on Burnside Avenue. They played a fun show and the band sounded great (my ears are still ringing). Here is their iconic singer “Dick Valentine” on stage. The band delivers hilarious onstage banter and are highly recommended. The crowd at Dante’s was also great and everyone seemed to be in good spirits.
When I was in high school Yngwie Malmsteen hit the metal scene like a hurricane. That was back in the day when you would have long and furious arguments about who was the “best” guitarist (remember, we didn’t have the internet and had to fill our time with something other than social media). When Yngwie emerged the term “shredding” became the norm and Yngwie was the apex of that style of guitar playing – almost the photo that you would put adjacent to that term in the dictionary.
His debut album “Rising Force” was a classic in that genre – mostly instrumental and filled with probably just about the recommended dose of Yngwie for most non die-hard fans. The hand raising his iconic guitar above the fire is the image of Yngwie that jumps into my mind first and foremost.
When I worked in the power industry everyone understood that the cost of a power outage was high, but it was impossible to put a precise value on it. There is the reputational damage, the specific costs of payouts to businesses and residences that are impacted (depending on your jurisdiction), the cost of restoring service (typically it is “all hands” in terms of available personnel and equipment), and finally the loss of trust by your all-important regulator when you come back later and ask for an inevitable price increase for your customers.
The other, more subtle, cost of outages is the fact that businesses and residents must plan for unreliable power sources, and invest in backup generation which includes fuel, testing, etc… I would call this “planning for failure”. Over time, this also causes businesses to consider exiting the grid entirely in one form or another when they are large and capable enough, causing the remaining fixed costs to be borne by the remaining customers.
Here in Portland right now we are dealing with a major outage, as a fire caused a power outage to over 2000 customers downtown near the Pearl district. This isn’t 2000 customers… most of these meters are large businesses and buildings and not individual houses. In practical terms, the downtown Target is probably closed, Powell’s bookstore (a major tourist attraction) is closed, and many, many other smaller businesses and restaurants. It would be similar to a power outage taking out most of River North in Chicago where I used to live.
Luckily I live in a building with a backup generator, and they have fuel for 3 days, so we likely will be unaffected. That’s what you get when you pay more for a recently built class A apartment rather than an older vintage walkup. But many, many folks are going to be impacted by this (it was over 90 degrees yesterday) and many restaurants are going to have to throw out their food on top of losing a couple of days’ worth of customers.
As we re-think electricity and the grid entirely it is important to consider reliability in the equation. I believe that many individuals and businesses just take power for granted until it isn’t there anymore. This challenge will likely be exacerbated by renewables and solar power… in this outage it is a distribution system failure, but intermittent generation of power is another variable in the reliability equation.
Cross posted at LITGM
“Disruption” is a word usually reserved for hyped sectors of the economy like technology and “Uber” is the ubiquitous example that even a child would recognize. However, there are other components of the economy ripe for disruption, especially those that are heavily regulated, which generally causes significant distortions, monopolistic behavior, regulatory capture, high prices, and a lack of innovation.
The liquor industry is a heavily regulated industry, with layers of distributors and obscure rules which enforce local monopolies, entrench incumbents (often with inferior products), and provide many opportunities for the government to extract tax income and solicit donations from favored groups. Typically liquor uses a “three tier” system, where there is a producer, a distributor, and a retail outlet (a store or a bar). This is a system ripe for disruption.
Alongside this archaic regulated system (which works for the benefits of the government and the local monopolies), there was a multi-decade process of concentration within the liquor industry, as local beer manufacturers were bought up by massive multinationals, culminating in the InBev company which controls a huge chunk (28%) of world-wide beer sales. If it wasn’t for the craft beer counter-revolution (see below), the epic consolidation of the liquor industry would have gone on indefinitely, bringing out “innovations” like Bud Light Lime.
Some of the components of the disruption of liquor in Oregon include:
1) Craft breweries or brewpubs which brew their own beer (and cider) and can sell it onsite
2) Distilleries able to make their own spirits and sell themselves out of their facility
3) New technologies such as Growlers or Crowlers which enable customers to fill directly from a keg into a re-usable container and take the beer home to drink
4) This is all in addition to the vast wineries (seemingly everywhere) that can sell directly and even ship to many states
Craft Breweries:
Portland and Oregon have been leaders in the craft beer movement, enabled by laws (passed against the political power of the beer distributors) which allowed for the brewpubs to sell their own alcohol.
This article describes how the modern brewery was instituted in Oregon.The “beer culture” is everywhere, with 116 breweries within an hour of Portland, as evidenced by the cover of this recent magazine I picked up. Here is a link to the magazine online.
Recently I visited Cathedral Park in Portland, which lies beneath the St. Johns Bridge. The St. Johns Bridge is a magnificent structure, built in 1931, during the height of the depression.
Portland is a city of bridges. These bridges were mostly built long ago, when construction projects were feasible in terms of costs and delivery time frames were measured in years, not decades (when approvals, funding, environmental contingencies, etc… are factored in).
Today the Portland metropolitan area, which includes large Washington communities north of the city, faces severe constraints on traffic and there is widespread local agreement that commute times are growing longer and in some instances intolerable. I know individuals in Chicago, LA or NYC that would laugh at commute times that aren’t 2+ hours but that is little consolation to the locals who previously had been able to drive around the metro area with relative ease.
Many of these bridges need to be replaced for multiple reasons – the Pacific Northwest is an earthquake zone and most of these bridges are not built to survive a quake, traffic on the bridges is soaring and causing delays throughout the system because they function as bottlenecks, and frankly bridges cannot last forever without collapsing.
And yet… it will never happen. I am confident that we won’t be able to raise the billions that it will take to build these bridges and lawsuits and environmentalists would create innumerable roadblocks (with accompanying cost increases and delays) so that even difficult projects will become impossible. There is an utter breakdown in funding, public will, solid execution, and all the fundamental components that make infrastructure possible. While China has built giant, soaring cities, we can’t even replace bridges and roads built 100 years ago.