The venture capital firms here in the Valley have turned to energy as the next great easy money hope. Unfortunately, energy is about physics while communications was about squeezing down everything to mathmatics.

What they found, as I did when I looked at the issue in my MBA program circa 1996, was that there were NO advances in physics to exploit about energy. The few viable business plays are around the fringes and are cost-reduction plays (3D seismic modeling for oil and gas exploration for example.)

The current bandwagon of VC investments is pure rent seeking. Their investments will make money ONLY with government coercion. When government imposes a 30% renewables mandate and cross-subidizes electric bills, Sunpower will get real business and only then. When government requires remote controlled thermostats in all homes and businesses, then the suppliers to the “Smart Grid” will have a market.

Little wonder that the Silicon Valley business elites overwhelmingly turned out for Obama.

Note to Annoy Mouse –

I didn’t say that we won’t have another cycle of big productivity gains, just that IT and the internet is about played out and will become a normal business like DuPont and Boeing, two companies that had analogous positions in earlier innovation cycles.

Another fundamental basis for our last couple of decades of boom times has been the arrive of Chinese labor to the global market. Dump a billion or so extremely cheap workers on the market and the global price collapses while overall costs fall. Can China continue to spend on infrastructure and education to bring the rest of their population into the global market?

Again, I think this long cycle is plateauing for a couple of decades until a new technical innovation arrives and risk capital is invested in it. Again, the global economy is reverting to the mean.

We could afford new members to the tax-eater ranks when above-average economic growth was happening. Politicians were eager to buy their votes with our money. Today, they represent a constituency that seems to have overwhelmed the producers’ political interest.