Memorial Day Links

• My own experience is so far teaching me that energy metabolism is so universally applicable, built into the design of the universe and enshrined in the laws of thermodynamics, that optimizing idiosyncrasies of energy metabolism is often more fruitful than following a condition-specific evidence-based medicine approach built on the behavior of group means in randomized controlled trials. [Chris Masterjohn]
• The culture war cannot be won on a purely secular level. Spiritual forces are at work. Ignoring these forces seems to be a recipe for defeat. Whatever spiritual or religious tradition the Right looks to for its support, that tradition must offer warriors a place within the sacred. Something like “muscular” Christianity, reimbued with the old virtues of chivalry, will be required. American greatness cannot be restored just by passing the right set of rules or laws. Restoration will require great leadership from men of great character, a “virtuous elite,” possessed of what the Greeks dubbed arete and the Romans virtus. [Contemplations on the Tree of Woe]
• The big takeaway from the energy producer earnings results from the first quarter is that there were very large increases in capital expenditures which resulted in unimpressive production growth, and even declines. The two possible causes of that adverse trend would be cost inflation (more expensive labor and material inputs for a given result) and resource exhaustion (declining quality of rock requiring more effort to get the same result). Another takeaway from the quarter is that the producers' capital expenditure discipline is not as good as we would like. While they are (thankfully) spending less than half of operating cash flow on capital expenditures (which implies that we are still relatively early in the capital cycle), why spend anything to maintain production when Biden is hammering the oil price? What is bad for producers can be good for royalty owners. We have been saying this for years and this quarter we are asking ourselves why we strayed from the first class assets. Rising costs are bullish for royalty owners. Undisciplined spending on production is very bullish for royalty owners. [CBS]
• Capital expenditures in the upstream segment were $639 million for Q1 2023 versus $377 million in Q1 2022, an increase of 70%. (Downstream capex was flat.) The oil sands production was down about 1% y/y, liquids production was down 3%, and total upstream production was down 2.5%. The oil sands capex specifically was up 69% year over year. [CBS]
• Oxy gives really good disclosures of capex and production by basin in its earnings release. In the Permian, which is their most important basin, capex was up 75% year-over-year with BOEs up only 23% and actual barrels of oil up only 20%. On the Q1 conference call, Oxy was talking about how they drilled the longest DJ Basin well ever (25k ft), set a lateral length record (18k ft), and set a record for continuous pumping time (28 hours vs 22.5) in the Delaware in the Permian. Are we excited that oil wells now require five miles of steel pipe when a century ago you just had to poke a hole in the ground to get a gusher? [CBS]
  
• Indeed, if you were looking for a start date for the era of conspicuous consumption and “planned obsolescence”, you could hardly chose a better moment than this one. Under Alfred Sloan, GM shifted the model of car marketing. Models were sold on their attractiveness. New colours were introduced each year to wow consumers. Alongside gradual changes to car features each year, Sloan championed an approach of “dynamic obsolescence” which would put pressure on consumers to upgrade their cars routinely rather than run them into the ground. Car paint, more specifically Duco, was one of the critical vectors in this strategy. [Material World]
• Suppose you’re a poor teenager in a dysfunctional environment. You have to work a part time job to help make ends meet. Your parents are absent or completely checked out. So you have to help take care of your younger siblings. You’re smart, but you’re not in a position to devote much time to homework; to getting top grades in every class. But you set a few hours aside in an afternoon, and receive an outstanding score on the SAT. Suddenly, options become available to you. Our ruling class is doing all they can to prevent this possibility. [Rob Henderson]
• Why do babies put everything in their mouths? Because they don’t know anything. For them, the world presents endless opportunities to search for tasty treats. If you’re a baby, putting every object you encounter into your mouth is like pulling the handle of a slot machine hoping to hit the jackpot. But as kids grow older, they become more selective about what they’ll eat. They went through an explore phase, now they are in exploit mode. For men, the Settling Down period means tilting away from exploring new opportunities and more towards exploiting the life foundation they established during early adulthood. [Rob Henderson]
• Luxury beliefs have, to a large extent, replaced luxury goods. Luxury beliefs are ideas and opinions that confer status on the upper class, while often inflicting costs on the lower classes. In 1899, the economist and sociologist Thorstein Veblen published a book called The Theory of the Leisure Class. Drawing on observations about social class in the late nineteenth century, Veblen’s key idea is that because we can’t be certain about the financial status of other people, a good way to size up their means is to see whether they can afford expensive goods and leisurely activities. This explains why status symbols are so difficult to obtain and costly to purchase. In Veblen’s day, people exhibited their status with delicate and restrictive clothing like tuxedos, top hats, and evening gowns, or by partaking in time-consuming activities like golf or beagling. These goods and leisurely activities could only be purchased or performed by people who did not work as manual laborers and could spend their time and money learning something with no practical utility. [Rob Henderson]
• The Soviet and Maoist regimes would allow terror to reach a point where people are about to become completely disillusioned, only to step back and allow for temporary breathing spells. People could again experience pleasure and taste something resembling freedom. This zigzagging is how totally corrupt and cynical regimes were able to control their populace. They understood that human misery must never be allowed to reach a point of desperation where death—suicide or murder—is preferable. Berlin calls the communist artificial dialectic an “astonishing invention” that is so impressive that it rivals “the most ruthless and megalomaniac capitalist exploiter.” By strategically shifting between periods of tranquility and terror, the Soviet and Maoist regimes developed a comprehensive instrument for breaking the wills of more than 1 billion human beings. [Rob Henderson]