Charles Hugh Smith: Why Local Enterprise Is The Solution

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A growing number of individuals believe our economic and societal status quo is defined by unsustainable addiction to cheap oil and ever increasing debt. With that viewpoint, it’s hard not to see a hard takedown of our national standard of living in the future. Even harder to answer is: what do you do about it?

Charles Hugh Smith, proprietor of the esteemed weblog OfTwoMinds.com, sees the path to future prosperity in removing capital from the Wall Street machine and investing it into local enterprise within the community in which you live.

“Enterprise is completely possible in an era of declining resource consumption. In other words, just because we have to use less, doesn’t mean that there is no opportunity for investing in enterprise. I think enterprise and investing in fact, are the solution. And if we withdraw our money from Wall Street and put it to use in our own communities, to the benefit of our own income streams, then I think that things happen.”

“We have to solve our own problems. The savior state and these institutions are not going to reform themselves and they are not reformable in any way that is meaningful. And so, I think what we’re talking about is taking your capital, which is your human capital, your skills and your experience; your social capital, the people you know and trust that you’ve created in life; and your financial capital and investing them in local solutions. Things that people need, like energy and food and shelter and a low energy lifestyle.”

“There is opportunity for technological innovation in greatly increasing the efficiency of our appliances and the rest of our lifestyle, as well as tremendous technological improvements in productions and so on. But there’s also what we might call social and behavioral innovations, which the United States is really poor in recognizing. The simplest way to cut your energy is to live close to the things that you need to get to. And if you have your own enterprise, then we might benefit on a household and a social scale of just living close to your job. So being dependent on corporate America and a job a hundred miles away - that’s a really fragile, vulnerable lifestyle. So if you can relocalize your income streams and your enterprises and live close to work and school, you’re already tremendously more resilient and have a much more sustainable household regardless of what happens.”

Also in this interview:

  • Why keeping capital in the financial markets puts you at increasing risk of mis-aligned Wall Street incentives as well as declining asset prices
  • How de-globalization, de-legitimization, de-centralization and de-finacialization will be major trends driving our economy in the future
  • How investing in your local economy can yield a higher quality of life, even if your relative "standard of living" decrease

This is a companion discussion topic for the original entry at https://peakprosperity.com/charles-hugh-smith-why-local-enterprise-is-the-solution-2/

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"if you can relocalize your income streams and your enterprises and live close to work and school, you’re already tremendously more resilient and have a much more sustainable household regardless of what happens."
The problem is how to localize your income streams and localize your enterprises. Localize your business might be a wrong move. Out  Source your business might be a better  choice. That is what many people did.

The local Fire department had a note that our ceiling tiles need a two hour fire rating. The fire will not penetrating the tile for two hours if there is a fire. The space shuttle don’t have two hour fire rating, but they asked a Chinese restaurant for it. One day my manager called me like crazy said our water was shut off by utility department while we were cooking.(chicken chow mein no water? LOL). The reason was they did not receive our fax for the invoice of grease pump every three month. We did fax it but the city single fax machine could not handle that many fax. The fax papers were always on the floor like a long carpet. Later we found the trick, fax it three times in intervals, won’t miss it. Fifteen years ago, I try to take my company for franchising, American dream, huh? First obstacle was setting up a legal department. It means that I need to be a lawyer before I can expend my business. There are too many law problems and one mine goes off, you lose the whole company. How about labor law? There was a "where were you born" in a local Walmart job application. Walmart was fined 360K. By law as a reference 360K can apply to everyone if whoever accidently step on it. For an enterprise, hiring, lay off, firing employees are normal. In todays labor law, basically you cannot fire employees,especially minority employees. Any lay off employees can take their employor to court without paying the lawyer. Over other hand, the employor need to pay $250/hr lawyer’s fee to protect. In court process, employor must choose to compromise to avoid the danger of lose the entire company, pay the lay off as requested. If there are many not- qualify worker which you cannot get  them out of  your company. The company will be gone very soon. Americans lost jobs is not their high wages, is the government run them away.

In other words, no matter what resilient effort we think, there will be no much security if we cannot get government’s hand off our back. I have no question that government will never go back off and drive the system to collaps. That is given.

One day governemnt may say it is illigal to dig holes in your back yard (garden) and should share your harvest in some fashion.

In Chinese" if you can’t fight for it, you should escape from it.". Our resilient effort may not be a good escape tactic. The big solar pannels right there. The green vegetables are right in the yard, and you are the target, can’t escape. So I don’t have solar pannels, but I do stock up rice, a lot and cheap.$2,000 for 2 1/2 year food supply for family of 4, why spend more money to dig holes in my back yard? (My personal opinions, may not be correct.)

 

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This is great, Adam (and Charles and Chris); thanks!
Congratulations on your book, Charles; I can’t wait to read it!

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Super preservative discovered.

Chemically related to nisin, a preservative already used in cheese, bisin apparently kills E. coli, salmonella and listeria so effectively that foods (not fruits or vegetables though, since different biology is at work in their decomposition) that have been treated with it could, in theory, last almost indefinitely
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Great interview, thanks for that. I think I’ll get that ebook, now that I got my iPhone today (you Americans are still doing something right!)
I’m glad Chris mentioned wood as an energy source because that’s something I have been thinking about lately, specifically how to turn it into electricity. It makes a lot of sense, especially for temperate climates.

In summertime, generating enough electricity to power your home and electric car isn’t too difficult, provided you have a decent sized lot. Solar panels will do it no problem for most situations and you wouldn’t really notice too much of a difference in your ability to do things that require energy – even drive 100 miles if you want. Throw in a wind turbine in appropriate locations and there you go.

But in winter it’s a different story because you aren’t going to get enough energy from your solar panels. But then in winter we are also doing something else to get energy … we are burning wood in our wood stove. I don’t know about everyone else, but when our stove gets going, we have to open the windows to cool the place down. They aren’t highly efficient either as lots of heat goes up the flue. To keep the fire going they have to be a certain size which means they are going to waste a lot of heat.

Wood contains 15 megajoules of energy per kg so if you burned 10 kg and let’s say converted 10% of that into electricity then that’s 4 kilowatt hours, not too bad! And the other benefit is that the other 90% is waste heat, which is exactly what you are burning wood to produce in the winter anyways! This is "cogeneration" which takes advantage of the inefficiencies inherent in the second law of thermodynamics to do useful things with the byproduct heat.

I did some preliminary internet searching and found some Canadian guys who made a wood fired steam generator to make electricity but this is not at all practical for the average person because it is noisy, complicated, and dangerous. It uses a complete Rankine cycle which reuses the same water to make new steam.

But a much simpler system would just be an open steam generator. You’d fill up a reservoir with clean water and this would feed a series of tubes or plates on the shell of the wood stove. This would basically be a boiler, and the water would boil and feed into a low pressure storage tank and then run through a little steam turbine to vent outside. The turbine would charge your battery bank, just like a wind turbine. You could also put the exhaust steam / water through a heat exchanger to recover some of the heat for your hot water tank.

It would use up water of course but around where I live we have more water than we know what to do with in winter. And because the water wouldn’t likely be pure (although you could run it through a de-ionizer), then you’d get scale build-up inside the boiler section but once a month you could soak it in vinegar.

So far I haven’t seen these things available but I imagine they will become more common as energy becomes more expensive. With this setup you really wouldn’t have any noticeable impact to your overal energy constraints between summer and winter (assuming you aren’t living in an apartment and have room to set all this stuff up), you’d simply be using different methods to harness energy (solar panels and steam turbines) and different ways of using it (electric cars).

Wood is pretty common, and with no more new houses being built for a very long time into the future, all that construction lumber that is no longer being bought needs to go somewhere, like ground up into wood pellets! Plus wood is sustainable; many of Canada’s forests just burn to the ground if they aren’t cut down by us first, so we might as well burn them in our stoves to produce electricity instead!

Back in the day studying forestry, we learned about how a lot of the forests held privately in eastern North America are not very productive at producing biomass because they have been selectively logged several times, which basically means that they were "high graded", ie the best trees were taken out and the remaining poor stock left to occupy the site and prevent young vigorous trees from getting establishing. This has also stifled the monetary gains that the owners of this land can realize, because it isn’t producing good wood. I imagine a program to improve the productivity of these degraded forests would help increase the ability of local woodlots to provide energy for homeowners.

Edit: I just found this video of a miniature steam turbine. Pretty easy.

http://www.youtube.com/watch?v=J373PZwA-aU&feature=related

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This is a great write up and couldn’t be more on. Michael C. Ruppert shares these same views: 
http://goo.gl/25cDy

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[quote=kennyq]
"if you can relocalize your income streams and your enterprises and live close to work and school, you’re already tremendously more resilient and have a much more sustainable household regardless of what happens."
The problem is how to localize your income streams and localize your enterprises. Localize your business might be a wrong move. Out  Source your business might be a better  choice. That is what many people did.[/quote]
You would be technically correct if we could have infinite growth in a finite world as most economists believe. With re-localization the focus will shift from capital to labor and productive activity.
Govenment interference and support for Wall Street that make outsourcing a better choice in the short term will be forced to change once it is generally recognized that the global economy can not be sustained.
An ancient Roman saying: The fates lead the willing and drag the unwilling.

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Congratulations on the new release.  I ordered it as soon as it came out on my iPad and am jamming through it now.  I also read Survival+ and have recommended that to all of my friends and family.  Without question, one of the most powerful, thought-provoking books I’ve read.
In fact, your insights and observations have inspired a lot of what we write on our blog www.theresilientfamily.com, and we’ve borrowed quite liberally (giving you credit of course) for much of what we write.

The future is going to be a wild ride.  As I write, the Dow is down over 500 points.  But thanks to these books, I’m able to sleep a little better at night.  Radical self-reliance is such a powerful concept that we’ve been preaching it to anyone and everyone who will listen.

Thanks again…

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 Our original growth/wall street system may have to collapse first but hats off to the few attempts at local currencies in the states to promote keeping the money in the community like Berkshares in the Berkshires.  They are tied to the dollar when you purchase them so I’m not sure what would happen to Berkshares if the dollar collapsed and was worthless?
MrEnergyCzar

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Thanks Dr Martenson and CH Smith.
Fortunatly I tried other ventures to position myself for the coming catastrophe and so I was unable to afford to buy a house which Blind Freddy could see was a bubble. One thing we do have in Australia is land. If you want to walk across it’ you had better take a cut lunch. The game had to be rigged if they think that one quarter of a million dollars is a fair price to pay for a vacant block. ie $1 million/acre.

So now I have two yachts. I shall use one to grow Porphyra here in Esperance WA.

I live just around the corner.

The other thing that I can do is look for gold in the paleo river mouths. Or scheelite in the granite.

My yachts provide me with shelter, a bed, electricity, transport and a business. And they are paid for.

It is not all bad not working for the Man. I am following Orlov’s advice and weaning myself from the machine, at my own pace, so that when it grinds to a halt I can step gracefully off.

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 Wow- this was hands down my favorite guest interview ever. I can’t wait to read more of his work. 
Chris said he doesn’t know "how to counsel individuals on how to change the macro system," but I’m not so sure it’s about changing the macro system anymore. The best we can do is follow CM’s lead and step as far outside it as we can, and then hold open the space in which new constellations of enterprise- I like that word- can evolve. Posts like this help us do just that. 

Betsy

PS. re MyEnergyCzar’s comment about the Berkshares- I’ve wondered that myself. There is a good deal of social capital involved in that currency; I wonder if it is enough to allow it to behave differently from the dollar in a currency crisis. Unless, of course, they are able to back it with a basket of locally produced goods, as I’ve heard they are working towards.

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Kennyq,I completely second your comments.   A warning to anyone trying to relocalize, get off the grid, or lead any type of productive economic existence- especially as an unestablished young person or couple- The STATE can an eventually will destroy your efforts.  They will not leave you alone to live in peace.  
I don’t disagree with the premise that relocalizing is the only sensible solution.  In fact that idea is becoming quite popular.  However,  as a young person starting out right now- you are like the first zebra to jump into the crocodile infested river crossing.  Once the crocodilian state auditors, selectmen, listers, inspectors, bureau heads, and officers tear you to shreds, and have fed, the rest of the heard will run right over your corpse to freedom.  
Your in a double bind.  You’re doomed if you do and doomed if you don’t.  I don’t want to go into my long and disgusting personal experience with all of this.  Suffice it to say, the nail that sticks up gets hammered down.  I don’t know if my plans/life are completely destroyed yet but I’m certainly not doing that great.  There is no other complication here besides state interference- minus state interference I would be perfectly set up. 
I’m not trying to scare anyone away from doing the right thing , just be prepared to fight and possibly lose big. 

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[quote=Mark_BC]In summertime, generating enough electricity to power your home and electric car isn’t too difficult, provided you have a decent sized lot. Solar panels will do it no problem for most situations and you wouldn’t really notice too much of a difference in your ability to do things that require energy – even drive 100 miles if you want. Throw in a wind turbine in appropriate locations and there you go.
But in winter it’s a different story because you aren’t going to get enough energy from your solar panels. [/quote]
Hello Mark,
Depending on where you live in BC what you say about winter may be correct, but good solar design should be based on the low sun hour times of the year so that the system will meet your necessary electric loads.  Among other things, I design solar water pumping systems many of which are installed in Canada and they pump the required water volume year round.
Here in Tennessee we have an off grid cottage and are building a totally off grid home at the moment.  Last winter while living in the cottage we had several extended periods of unusually cloudy weather and we did not have a single low voltage event.  Visit http://www.nealcreekfarm.com to see the cottage and the progress on our steel structural insulated panel super insulated house progress.
The house will operate on 2,200 watts of 24 volt panels (10 panels) using an 80 amp MPPT (maximum power point tracking) charge controller and a 3.5 kW sine inverter.
Efficiency is key.  We will be using low voltage for refrigeration, lighting, ceiling fans, ventilating fans and water pumping.  There will be no 230 volt loads in the house.  The only propane use will be for cooking gas.
The majority of our heat will come from an earth heat exchanger (earth tube) buried under 35 tons of limestone rock which will store the heat gain during the day from an 8 x 40 foot attached greenhouse porch.  Air conditioning will come from pumping water from Neal Creek, which never gets warmer than 66 degrees F, and circulating it though a fan coil and putting the water back in the creek.
If you need help with solar visit http://www.sunshineworks.com.
Cheers,

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this is a great idea… why didn’t i think of this ? 
It will be so easy for me to turn out the next smart phone innovation in the back of my garage and sell it to my  neighbours… brillant… and of course i can do it all with local materials… perfect… a wide range of careers awaits… now everyone can be a work from home dad mapping the human geneome, building the next generation of space rockets, nanotech and bio tech research all from the comfort of a back garden or spare bedroom… IBM, Apple, Microsoft and Google will soon close down their enormous campuses and have everyone live in the mid west and work from home… hippy genius…

take a look at the stuff you rely on every day, even the keys of your keyboard and the back light in your screen… almost everything in your home would be impossible to manufacture locally, unless you wanted to live like a 60s acid casualty… this is just aging baby boomers who missed out on the 60s pipe dreaming now they’ve discovered medical marijauna

 just wack some solar panels on the roof of your house… they are made locally of course and away you selfishly go…

 … anyone for communal free love ? 

 

 

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"I want to get your thoughts on this idea of needing to choose between growth and prosperity – they’ve been linked for a long time. We’ve always had both and I think they have been conflated and they are actually separate ideas in my mind."
Essentially this question is expressed in corporations as the choice between Sales Driven or Profit Driven.   A Sales Driven corporation will rarely walk away from a deal, instead choosing to cut margin to gain sales at all costs.  A Profit Driven corporation will understand the marginal costs of its business and walk away when the profit is not enough compared to other opportunities. 

The FED is essentially a Sales Driven corporation managing our Money (as Chris stated and to paraphrase: managing the Currency of Societal Trust).  That is scary thought.

I call them the "Great Linearers"; those who are running/ruining our world because everything looks like a nail to them since all they have is a hammer.

 

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hardware.slashdot.org/story/11/08/19/1218219/13-Year-Old-Uses-Fibonacci-Sequence-For-Solar-Power-Breakthrough
Apparently this kid has more than a hammer…

 

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I looked at Hugh Smith’s graphs on his blog.  First of all, graphs are nice but given that the statistical data re GDP and similar is nonsense what use are they?   The household wealth in stock market graph does not factor in Private Equity.  PE is black box. and I am not fond of many PE companies who are serial credit defaulters using the legal system to screw creditors.   Hugh Smith has some interesting ideas, but I would not put much into graphs to make a point. 

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[quote=ptf]
Kennyq,
I completely second your comments.   A warning to anyone trying to relocalize, get off the grid, or lead any type of productive economic existence- especially as an unestablished young person or couple- The STATE can an eventually will destroy your efforts.  They will not leave you alone to live in peace. [/quote]
A lot will depend on luck but as an unestablished young person or couple you establish yourself through community and sharing, but you have to do it now.The state will be busy protecting the elites, they don’t have the resources to swat every fly and in the end the state will fail.

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[quote=technet]
this is a great idea… why didn’t i think of this ? 
It will be so easy for me to turn out the next smart phone innovation in the back of my garage and sell it to my  neighbours… brillant… and of course i can do it all with local materials… perfect… a wide range of careers awaits… now everyone can be a work from home dad mapping the human geneome, building the next generation of space rockets, nanotech and bio tech research all from the comfort of a back garden or spare bedroom… IBM, Apple, Microsoft and Google will soon close down their enormous campuses and have everyone live in the mid west and work from home… hippy genius…
take a look at the stuff you rely on every day, even the keys of your keyboard and the back light in your screen… almost everything in your home would be impossible to manufacture locally, unless you wanted to live like a 60s acid casualty… this is just aging baby boomers who missed out on the 60s pipe dreaming now they’ve discovered medical marijauna
 just wack some solar panels on the roof of your house… they are made locally of course and away you selfishly go…
 … anyone for communal free love ? [/quote]
You are romanticizing a morally bankrupt and collasped way of life. In the 60s not every baby boomer freaked out on acid. The future is likely to look more like the 40s and the 50s–we won’t have iphones–but why do you think that is bad?

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 You know Technet, it is so tempting to use the ignore button for comments such as yours however I will not. What I can comment on though is quite simple. It will be very obvious to readers here that your circumstance will leave you as the most vulnerable of individuals during a great realignment of living standards that threaten western society. So believe or not it might be more productive for you to explore where you will fit and survive in this shift. Some of the smartest people on the planet have called themselves to action on this matter and are doing it rather than dismissing all the warnings as gobbily goop.