Entrepreneur Risks His Money; Government Risks Yours


KaiserGeorgeB.jpg George B. Kaiser.  Source of photo: http://www.forbes.com/finance/lists/10/2003/LIR.jhtml?passListId=10&passYear=2003&passListType=Person&uniqueId=OXNB&datatype=Person

 

(p. A1)  In 2002, Kathleen Eisbrenner, then an executive at El Paso Corp., spent months trying in vain to find a buyer for the company’s novel technology for importing natural gas.

In February 2003, she left for a vacation in Cancun, convinced that El Paso would be forced to abandon the project.  As she sat on the beach one afternoon, she got a call on her cellphone.  A colleague had a message from an intermediary, who said he had an "interested buyer," identified only as a "Midwest billionaire."

"It’s Warren Buffett calling," she recalls telling her husband as they clinked pina colada glasses together in celebration.  "I was absolutely sure."

But it wasn’t Mr. Buffett.  It was another billionaire named George B. Kaiser. 

 . . .

(p. A6)  . . . , Ms. Eisbrenner called Nicolas Saverys, the chief executive of Belgium-based Exmar NV.  Exmar was building two of the new-style LNG vessels.  Ms. Eisbrenner gushed that there was a wealthy buyer.  Mr. Saverys was initially skeptical.  He changed his mind in late February 2003 after meeting Mr. Kaiser in New York.  "At last, I was talking to someone who was putting his own money at stake," he says.

Mr. Saverys sealed the relationship by presenting Mr. Kaiser with a box of pralines from Belgian chocolatier Pierre Marcolini at their second meeting.  Mr. Kaiser, an avowed chocoholic, returned the favor a couple of weeks later in Tulsa, giving Mr. Saverys a box of candy made by Christine Joseph, a Tulsa chocolatier who also was born in Belgium.

Convinced that Energy Bridge could work, Mr. Kaiser agreed to take over the business, closing the deal last December.  El Paso paid him $75 million; in return, he assumed a $120 million obligation to Exmar.  El Paso also agreed to pay to install the underwater pipeline connection that carries the gas from the ship to existing pipelines in the Gulf of Mexico.

The bulk of the $660 million Mr. Kaiser invested went to modify three specially equipped tankers and to charter them for 20 years.  If Energy Bridge opens on time in January, it will be at least two and a half years ahead of any new terminals being developed by other energy companies.  In addition, civic leaders in Massachusetts and Rhode Island, eager to keep LNG terminals and tankers far from the mainland, are encouraging Mr. Kaiser to build an offshore tanker-based project along the Atlantic coast of the U.S.

Mr. Kaiser, who declined requests for an interview but answered some questions by e-mail, concedes he doesn’t like "taking a risk on an undemonstrated technology."  But he says that the chance to import natural gas quickly was "such an obvious and alluring business opportunity" that he felt compelled to get Energy Bridge into operation.  He’s betting that new LNG-export facilities expected to come online next year in Egypt, Trinidad and Nigeria will create enough extra supply to provide him with ample LNG.

 . . .

He says he acquired Energy Bridge as a challenge.  "I don’t gain much pleasure from personal expenditure or recognition," he wrote in an e-mail.  "And any gains I make from the enterprise will accrue to charity.  But I enjoy problem solving and I want to keep my brain active to forestall (or at least diminish) atrophy."

 

For the full story, see:  

Russell Gold.   "Liquid Assets: A Billionaire Takes a Gamble To Fix Natural-Gas Shortage; Mr. Kaiser Plans to Shift Processing Onto Tankers, Avoiding Terrorism Fears; A Deal Sealed With Sweets."  The Wall Street Journal  (Fri., July 23, 2004):   A1 & A6.

(Note: ellipses added.)

Raising Minimum Wage Destroys Job Opportunities

. . . , Ted Kennedy, argues that the minimum wage should be increased because it’s difficult to raise a family with the only breadwinner making the current minimum.  It’s a popular claim, but it is flawed, for three reasons.

  •  First, a study by economist David A. Macpherson of Florida State University and Craig Garthwaite of the Employment Policies Institute suggests that only 20% of the workers who would have been directly affected by an earlier $1 increase in California’s minimum wage were supporting a family on a single minimum-wage income.  The other 80% were teenagers or adult children living with their parents, adults living alone or dual earners in a married couple. 
  • Second, as economists David Neumark of the Public Policy Institute of California and William Wascher of the Federal Reserve Board show, increases in minimum wages actually redistribute income among poor families by giving wage increases to some and putting others out of work.  They estimate that the federal minimum-wage increase of 1996 and 1997 increased the proportion of poor families by one half to one percentage point.
  • Third, consider the long run.  Mr. Neumark and Olena Nizalova have found that even people in their late 20s worked less and earned less the longer they were exposed to a high minimum wage, presumably because the minimum wage destroyed job opportunities early in their work life.

 

For the full commentary, see:

David R. Henderson.  "Rule of Law; Minimum Wage, Minimum Sense."  Wall Street Journal (Sat., Feb 25, 2006):  A11.

Why Fear Nuclear When Coal is More Deadly?

HallTimothy.gif  The skin of Timothy Hall’s hands melted together in a coal mine accident in September 2005.  Source of image:  online version of the WSJ article cited below.

 

I am not against coal.  But I am puzzled why public sentiment and government policy discourage new nuclear reactors.  Per unit of energy produced, isn’t nuclear safer than coal?

   

(p. A1)  MCDOWELL, Ky. — Last September, Timothy D. Hall was drilling holes in the deepest part of a low-roofed coal mine when an explosion thrust him from his drill machine and set him on fire.

He crawled 45 feet to a mudhole inside the mine to douse the flames.  The fireball melted the bill of his hard hat, charred his oxygen canister and burned his jacket, according to government investigators.  After he was carried outside, but before any pain set in, he was shocked to see the flesh of his fingers had melted together.

 

For the full story, see:

KRIS MAHER.  "Deep Trouble As Demand for Coal Rises, Risky Mines Play Bigger Role Small Operations Overall Have Higher Fatality Rates; The Dangers of ‘Dogholes’ Long-Term, a Safer Industry."  The Wall Street Journal  (Thurs., June 1, 2006):  A1 & A10. 

 

In the graphic below, note that the long-term trend has been a decline in fatalities in coal production.  But the fatalities remain higher, per unit of energy produced, than the fatalities for nuclear energy production. 

 CoalMiningFatalities.gifSource of graphic:  online version of the WSJ article cited above.

 

 

 

Toffler Fear of Future Changes to “worry that the future will arrive too late”

  Source of book image:  http://www.randomhouse.com/catalog/display.pperl?isbn=9780307265555

 

The titular wealth they speak of comes from substituting "ever-more-refined knowledge for the traditional factors of industrial production — land, labor and capital."  The United States is producing more stuff than ever with fewer workers.  The Tofflers write that only 20 percent of the work force is now in the manufacturing sector, while some 56 percent (and growing) is engaged in what they call "knowledge work" — managerial, financial, sales-related, clerical and professional tasks.  Even activities like agriculture have gone high-tech, through biotechnology and increasingly sophisticated use of global-positioning satellites to customize irrigation and fertilization down to the individual acre. Knowledge-based wealth, they argue, is revolutionary not just because it gets more output from fewer inputs.  Unlike such physical resources as oil, knowledge can be shared by an infinite number of people, and its value and benefits are generally increased by wider circulation.  (A network, after all, is only as powerful as the number of participants.) Just as important, the Third Wave wealth system "demassifies production, markets and society," creating space for unending experimentation, innovation and individuation.

. . .

Despite visionary passages about nanotechnology (the manipulation of objects at the atomic level) and potential moon-based helium energy, "Revolutionary Wealth" is less interesting for its specifics (most of which will be familiar to readers of publications like Wired, The Economist and Red Herring) than for its evidence of how far we’ve come since the 70’s, when politics, economics and culture all seemed as played out as Richard Nixon’s denials of criminality.  In "Future Shock," the Tofflers warned that many people "will find it increasingly painful to keep up with the incessant demand for change that characterizes our time.  For them, the future will have arrived too soon."  These days, from Baghdad to Bangalore to Boston, it seems more likely that people worry that the future will arrive too late.  That’s no small change, and it’s one on which the Tofflers have been shining a light for years.

 

For the full review, see: 

NICK GILLESPIE.  "The Future Is Now."   The New York Times Book Review, Section 7 (Sun., May 14, 2006):  9.

 

The full reference to the Toffler book is:

Toffler, Alvin, and Heidi Toffler. Revolutionary Wealth.  Alfred A. Knopf, 2006.