Lance Armstrong Meets Wall Street

Lance Armstrong, a former sports icon and paragon of human resilience has been in the news lately.

It’s difficult to watch it without a sinking realization. Few wade through the sea of sworn affidavits from former teammates, legal testimony and other evidence within the infamous USADA report without reaching this same conclusion.  

Lance was a doper.

United Cycling Federation has decided to strip him of his record seven Tour de France titles, Nike has dropped his endorsement contract, and supporters of Livestrong want their money back.  Meanwhile, our former Wheaties athlete endures the flaming arrows of righteous indignants on CNN and across the blogosphere.

Lance Armstrong came to prominence after his Tour de France victory in 1999, and a nation revelled in his powerful biography It’s Not About The Bike, which tells the story of his troubled childhood, early racing glory, remarkable recovery from cancer and journey back to life and sport. He inspired millions, including me.

In high school, I was recreational cyclist with a bike best suited to the 1974 Tour de France.  I filled my mind with heady dreams of pelaton glory as I motored up the steep Ozark grades of home.  In my heart however, I knew better, and except for my ill-fated attempt to become the world record holder in pogo stick jumping (at the age of ten I was only about 141,500 jumps short of the mark) my sports dreams have stayed dreams.

I am not a Lance apologist, at the same time, I have found it hard to stomach the barbs of pundits who blame him for single handedly tarnishing a sport that was already rocked by doping scandals before this news broke.

I would rather state that the system was broken.

We have learned a lot about the nature of systemic problems in our study of the Wall Street financial crisis of 2008.   

At first glance, what appears to be work of greedy, competitive investors later proves more complex.  Greed had a lot to do with it, but so did altruistic desire to increase low income home ownership, by giving subprime mortgages for people who should not have qualified.

Big banks made foolish decisions, but they were aided by the lack of diligence by the SEC, who in 2004 loosened the Net Capital Rule, allowing these entities to become more overleveraged.

President Clinton talked a good game at the recent Democratic Convention, but he signed the Commodity Futures Modernization Act of 2000, which allowed the “self regulation” of over the counter credit default swaps, and indirectly caused the value debt of CDS to balloon one hundred-fold in the coming decade

The list goes on, but the bottom line is this.

A lot of people benefitted, from the investors who financed the loans all the way to the contractors who built the new houses. Though some were more culpable than others, it is hard to blame one group of people when there was plenty of guilt to go around.

Kind of like cycling.  Armstrong, regardless of how you feel about his bullying ways, operated in a transitional period of cycling where doping was endemic.

The one way they did it was with Erythropoietin (EPO).

EPO is a drug that boosts the blood’s oxygen carrying ability, and therefore the endurance of the athlete. It became widespread in the mid to late 1990s, and because tests were not developed until 2000, its use before was virtually unchecked. Even after that, most riders found they could easily evade detection by clever masking techniques.   Like complex derivatives, doping became more potent, dangerous and opaque. The ability to police this drugs, could not keep pace with innovation.

Tyler Hamilton, a former teammate of Armstrong, stated in a recent interview that he estimated that ninety percent of the fellow Tour de France riders of that time were doping.  He, and others have said that in order to compete on that level, riders had no choice but to use these kinds of drugs.  In a sport of hypercompetitive males where the difference between winning and being a footnote was sometimes seconds, is it realistic to expect someone like Armstrong to buck convention and sit out?  It’s like asking an unscrupulous Wall Street trader to stop dealing high yield toxic derivatives.

In cycling, like Wall Street you had to pay to play, and given the marginal enforcement in both arenas, most embraced a Faustian bargain to get that chance.

As fans of both the stock market and those yellow bracelets, not many of us were too concerned either.

It is telling that the UCI, the governing body that has chosen to revoke Armstrong’s titles, will not reassign the medals to his challengers. In fact, all of the runner ups to his seven victories have been either suspended or investigated for doping violations.

Unlike Wall Street traders, Lance will have to give back his prize money. While cycling may be getting clean, I am not sure that we are addressing the systemic issues that will likely lead to another financial crash.

In his book Not About the Bike, Armstrong tells of his nebulous future after cancer recovery, before he regained his cycling prowess.  Uncertain of what career to pursue, he thought he might be stockbroker.

Perhaps he has a future after all.

California Cap and Trade

California is scheduled to begin statewide regulation of all industrial carbon emissions in January of 2013.  This system, called “Cap and Trade” will set an overall limit, or “Cap” for carbon emissions by industry and utilities in California, and disperse a proportionate amount of carbon credits among these parties.  A carbon credit is a permit that allows a certain tonnage of carbon to be emitted by industrial entity. 

Because of the number of carbon credits are finite, the amount of carbon emitted is theoretically limited, and entities that pollute more can buy or “Trade” for credits from less polluting members on a market.  Hence, “Cap and Trade”.

This system is significant because it seeks to incentivize utilities to produce power with less carbon footprint.  It is a clever use of market economics that effectively amounts to a tax on carbon.

In his blog, Norm mentions that oil and utility companies have been historically opposed to any government efforts to limit carbon. (http://abnormalecon.blogspot.com/2012/10/californias-cap-and-trade-program.html)

This assertion is echoed by the New York Times in an article describing failed national cap and trade program which languished and eventually died in the US Senate in 2010, much because of opposition by fossil fuel industries and those who felt that any “tax” on industry would be a further nail in our countries economic coffin. http://topics.nytimes.com/topics/reference/timestopics/subjects/g/greenhouse_gas_emissions/cap_and_trade/index.html?inline=nyt-classifier

I think that California’s Cap and Trade program will be an interesting experiment, and whether or not it succeeds in the short term, is an indicator of a future where carbon is taxed.  Whether next year, or ten years from now, the effects of burning fossil fuels, I am convinced, will make evident the need to discourage carbon production.

This looming carbon tax, as well the finitude of our natural resources will, by economic principle, make fossil fueled energy more expensive to produce, and for consumers to use.

More than anything, I believe that more expensive unit cost of energy is the most important driver of conservation.  For example, in 2010, the average California resident used, on average, less than one quarter the electricity of a Wyoming resident.

http://energyalmanac.ca.gov/electricity/us_per_capita_electricity-2010.html

Not surprisingly, electrical rates in Wyoming are some of the cheapest, while rates in California are some of the highest in the country.  On average, though,  Californians pay about 60% less than Wyoming residents on their total electrical bills.

http://www.npr.org/blogs/money/2011/10/27/141766341/the-price-of-electricity-in-your-state

I could be accused of cherry picking my examples.  I freely admit that this is far from an empirical study. There are more issues to be examined, such as differing social attitudes of consumption, and whether the culture of California socially incentivizes conservation compared to Wyoming, the largest coal producer in the country.

Nonetheless, as higher energy prices, either by mandate or market become the reality, it will be exciting to see how we learn to do more with less.  In future blogs I will explore smart grid technology as a means to do just that.  Stay tuned.

From Springfield, Missouri, I graduated from Missouri State University(MSU) in 2008 with a degree in Biology and a minor in Mathematics.  During my time at MSU, I cofounded Students for a Sustainable Future, a student organization that seeks to raise awareness about climate change and the opportunities of sustainability.

After graduation, I worked two years for Holden Village, an off-the-grid retreat center in the Cascade Mountains of central Washington.  At Holden I was responsible for servicing and operating the 300 kW   hydroelectric power plant, running publicly regulated water treatment facility, maintaining the district heating system and occasionally driving a bus full of passengers down the snow-covered mountain switchback roads.  Working in this unique community was a fascinating learning opportunity which I credit for giving me an in-depth and practical understanding of renewable energy, clean water and energy conservation.   

In 2010, I worked as a BPI trained member of an Americorps weatherization team in Iowa, before moving to Hood River, Oregon in 2011 to work for a green builder there. I went back to Missouri in the summer of 2012 to help my uncle build his green home (www.rockspan.com) and recently returned to Portland, Oregon to work for a window craftsman as I pursue my MBA from Bainbridge Graduate Institute(BGI).

I decided to attend BGI because I want to apply my passion for sustainability in a organizational, non-profit or business setting. I believe that the skills, network and creativity embodied in the BGI learning community will afford the opportunities to do that.  Additionally, the spirit of BGI is one that values constructive creativity as its end goal.  In a society of pressing and grave problems,  I honor this credo of action which, not content to merely call these maladies to account,  also addresses these issues with creative and sustainable solutions.

My primary interest in sustainability involves our transition as a society to a post carbon world.  Though I believe that climate change is a compelling moral reason for such a shift,  I believe the primary impetus for such a change will be scarcity of cheap and available fossil fuels.

We need energy, and as human history has unfolded, the human species has seen a number of transitions in the predominant source of energy. Each transition, from wood, to peat, coal to oil, has marked a successive increase in usable energy, which has resulted in a corresponding rise in population and productivity.

For the first time in collective global history, however, we are faced the finitude of our energy resources.  Our appetites have outstripped the planet's capacity to provide.

Suddenly we are confronted with a world in which tomorrow, either by mandate or scarcity, we will have to live with less.

I do not want to romanticize what will be a difficult transition. My innate reaction to this problem is one of dread, as I envision a bleak and post-apocalyptic world, where like Mel Gibson in the 1980s film Mad Max, I am reduced to wearing animal skins, cage fighting and driving a car like the one I drove in high school.  A grim future indeed.

But perhaps Hollywood, with its dystopian visions does us a disservice.  What if living with less means we live more? Can we begin to imagine a future where finitude gives channel for creative solutions?  Can a world which energy is more expensive force us to live better? Or perhaps  encourage a more community-minded and interdependent populace.  Furthermore, what will  distributed nature of renewable energy do to equalize the power of nations?

If we are going to survive, and thrive in this transition, I believe it necessary to be creative, hopeful and alert.  We must enter this new world with our eyes open, aware of its perils and promises, and to be storytellers that can create a compelling vision of tomorrow.