Win-Win Investing: When the Irresistible Force Meets the Immovable Object—They Can Both Earn Returns

The headline in May 12 Wall Street Journal highlights an important direction in the energy economy: “There’s Not Enough Power for America’s High-Tech Ambitions.”  The article notes, the hunger for electricity has disrupted visions of a green energy transition: “One major source of disruption is data centers. The facilities are ballooning in size as people spend more of their waking hours online and companies digitize everything from factory processes to fast-food drive-throughs.”  

Focusing on fast-growing Peach State, the article continues, “Georgia’s main utility, Georgia Power, has boosted its demand projections sixteen-fold and is pushing ahead on a hotly contested plan to burn more natural gas.”

This is how the conflict between growth and the environment is often framed: The irresistible force(s) of tech growth and energy hunger, colliding with the immovable object of concern about climate change.  But maybe there needn’t be a collision.  Maybe the force and the object can actually be harmonized, for the mutual benefit of both.   This is what Directional Investing is all about: observing trends that can be made into friends.  

The Journal emphasizes that the energy surge is not just local, but national:

U.S. power usage is projected to expand by 4.7% over the next five years, according to a review of federal fillings by the consulting firm Grid Strategies. That is up from a previous estimate of 2.6%.

The projections come after efficiency gains kept electricity demand roughly flat over the past 15 years, allowing the power sector to limit emissions in large part through coal-plant closures.

So what will happen to energy production?  Some will say, of course, that we need “de-growth.”  That’s a fashionable thought in some academic and activist circles, but it’s not an acceptable answer for the nation—not many Americans want the U.S. wants to be Germany, let alone the Shire of Tolkien’s telling.  The cinematic Hobbits were cute, to be sure, but in real life, they would be desperately poor.  

Others will say greater efficiencies are possible, and that’s no doubt true.  However, efficiencies have a way of running up against Jevon’s Paradox—the more efficient things become, the more they consume.  

As for new energy sources, we’ll no doubt continue to dabble in wind and solar, but again, the German bad example is cautionary.  And nuclear power is making a comeback—including, as the Journal reports, in Georgia, where Plant Vogtle in Waynesboro has just been expanded.  (And the voraciousness for energy has gone international; they're even thinking about powering data centers in a volcano in El Salvador.) 

Yet the most obvious source of power is right in front of us: carbon fuels.  According to current thinking in the U.S., carbon fuel is mostly limited to oil and natural gas—coal is regarded as too dirty, and so American production has been limited, even as the world’s coal consumption is rising.  

However, if we were to apply ourselves to the challenge of cleaning coal, we could do so.  And that, in turn, would unleash the abundant power and wealth of coal—the U.S. possesses some 470 billion tons of usable reserves.  As the U.S. Department of Energy observed in 2022, the energy potential of that much coal (measured in British Thermal Units) exceeds that of American oil and gas. 

So it would really pay if we could figure out how to clean that coal; not only to get the energy but also to harvest the metals and other elements resources that make coal “dirty.”  We could discover, in fact, that “dirt” can be a resource.  For instance, coal oftentimes contains the element molybdenum, which in the larger environment can be a pollutant.  However, scientists at Northwestern University have just figured out how to use molybdenum to capture carbon.  Thus we can see the potential: The molybdenum in coal could potentially be used to pull out carbon from the atmosphere.  So a twofer: clean the coal, clean the atmosphere. 

In fact, properly thought through, every component of coal is valuable.  What’s said of animals in farms and stockyards—“use everything but the squeal”-- applies just as much to natural resources. 

Such circular-economy thinking is now being applied to carbon capture. 

For instance, on May 6, the Journal took note of an Illinois-based company, LanzaTech, that uses microbes to capture carbon.  We can step back and see that such organic carbon capture has the potential for near-infinite spinoffs into anything organic: food, fiber, fertilizer, and fuels, just for starters. 

On May 8, CNN reported on the opening of a direct air capture (DAC) plant in Iceland.  Interestingly, the plant, dubbed “Mammoth,” is powered by Iceland’s plentiful geothermal energy (another good “all of the above” energy source).  The new facility will capture the carbon and insert it into the earth, where it will soon bind into rock   When fully operational, the Icelandic plant looks forward to capturing 36,000 tons of carbon a year; to be sure, that’s a tiny fraction of the approximately 10 billion, and  tons of carbon emitted into the atmosphere each year, and so if the DAC vision is scaled up, we would need many such plants, even if each plant grows more carbon-consuming. Such carbon-consuming, we can add, brings with it the prospect of captured carbon being repurposed into building materials, and, over time, just about anything else. 

To some, that will seem a daunting prospect, and yet the proliferation of DAC sites could prove popular, as a tool for rural economic development (as I argued here, back in 2019), and of course, among investors. 

Because there’s so much energy, and wealth, involved that it’s impossible to see that we will obey the greens and leave it in the ground.  According to the Institute for Energy Research, total resources of oil in the U.S. amount to 2.8 trillion barrels.  (We can pause to note that resources is the total in the ground, or under the sea, as opposed to reserves, which is the amount that’s recoverable under current prices and conditions.)  By the broader measure of resources, at the current price of around $80 a barrel, that’s a total value of oil in the U.S. of $224 trillion.  As for natural gas and coal, the numbers are similarly astronomical. The truth is, the total ultimate value of carbon fuels in the U.S.—including methane hydrates offshore—is properly measured in the quadrillions of dollars.  To put that another way, that’s millions of dollars, per American.  Repeat: millions of dollars.   If it’s a shame to not use it, chances are there won’t be anything to be ashamed about. 

These mega numbers suggest that for all the talk about the energy “transition,” we’re not likely to transition away from carbon fuels—instead, we are transitioning our understanding of them, and how they can fit into an enlightened understanding of the circular, renewable, economy.  Carbon fuels burned  become carbon captured becomes carbon repurposed. 

The concept of the circular economy is another way of expressing this idea.  Indeed, once we establish circularity, the specifics of the climate-change debate matter less, because circularity means efficiency, and efficiency is a virtue beyond any externality.  

To put this another way, carbon capturing and repurposing offers a positive feedback loop of positive returns for investors—they can make money at every bend in the wheel.   With apologies to Simon & Garfunkel and their famous song, “Hello carbon my old friend/ I’ve come to talk with you you again.” 

The Directional Investor is happy to hum along. 

The Next Wave of Directional Investingt: The Military Industrial Complex Becomes the Military AI Complex

Maybe we should call it the Military IndustrAIl Complex.  On May 7-8, the mammoth Washington Convention Center played host to the AI Expo for National Competitiveness.  It was sponsored by the Special Competitive Studies Project, the brainchild of former Google CEO Eric Schmidt.

So for sure, all this has a good tech pedigree, and yet the Expo had a specific purpose: To encourage AI innovation, and AI-related investment, to go into the defense and national security sector.  And that, in turn, sends a clear signal to Directional Investors: This trend can be your friend. 

In tech circles, linkage to the “military industrial complex’ is not without controversy.  To be sure, the origins of tech are closely entwined with the Defense Department, including the legendary DARPA, and yet at the same time, the Bay Area culture that helped give rise to the unique vibrancy of Silicon Valley has long leaned left, hostile to what it sometimes called “the war machine.”  Back in 2019, Google rejected working on the Defense Department’s AI-based Project Maven.  (By then, Schmidt was long gone from the CEO position at Google, he served from 2001 to 2011.) 

Google’s departure from defense work was in keeping, of course, with the rise of “wokeness” in Silicon Valley and Big Tech overall.  Such wokeness opened cleavages across all of corporate America and American society.  Yet the separation of cutting-edge tech and national defense was perhaps most acute, as it posed a threat to American national security. Whatever the political sensitivities of techies, the United States, and its allies, needs to be defended. 

Happily, some tech companies, notably Palantir, stepped in to fill the breach.  Palantir chief Alex Karp has been outspoken in his championing of American interests, including, recently, support for embattled Israel.  Along the way, he has derided wokeness as the “central risk” to the United States, and offered his company, now based in Colorado, as a positive counter-example. 

So it was not surprising that Palantir was the most prominent exhibitor at the AI Expo in D.C.; Karp himself was a featured speaker.  No doubt some tech types are still hostile to DOD, and yet the plethora of exhibitors—including local-area colleges, such as American University, the University of Virginia, and Virginia Tech—suggests a useful closing of the cultural chasm.  Here, to mix a metaphor, the woke wave is definitely ebbing. 

Indeed, the underlying theme of the whole Expo was that American national security rests on a foundation of tech competence, including, of course, AI.  As Politico’s Mohar Chatterjee observed on May 9, “The gap between Silicon Valley and DC is shrinking, in no small part due to Schmidt’s matchmaking efforts in the name of an international AI dogfight.” 

The words “international AI dogfight” are a clear reference, of course, to rival countries—most notably, China—that have their own ambitious AI programs, as well as international objectives that might run counter to those of the United States.  

The U.S. is the clear world leader in AI—the most innovation, the most investment, the most prominent companies.  So now, if that tech capacity can be smoothly integrated into national defense, the nation can face the future with confidence.  Guarded confidence, to be sure, but still, confidence. 

And along the way, investors should see a clear path: Since it’s true what they say: The trend is your friend, we can see a clear trend: A bull market in the AI-defense sector.  And given the overall size of AI as it burgeons in the 21st century, that’s bullish, indeed.  

But of course, for every trend, there’s a counter trend, including bearishness.  And so I can report, after spending two days at the conference, that the big-name “prime” defense contractors were at most a minor presence. 

Buy The Secret of Directional Investing:Making Money Amidst the Red-Blue Rumble

Here's the link for Amazon. 

And here's Barnes & Noble

Blurbs for Directional Investing: 

Like others I’ve met who worked in the Reagan White House, Jim Pinkerton has a sharp mind and is an independent thinker. Directional Investing is full of great economic and historic anecdotes and frameworks that are helpful to understand and think about the past, and also how to understand—and shape—the future. — Joe Lonsdale, Founder of Palantir and 8VC

You can’t control the outcome of American politics, but you can still make money. That is the message of Jim Pinkerton in The Secret of Directional Investing. Don’t believe the doomsayers: America’s divisions create profit opportunities. It’s all about “being in the right place at the right time” insists Pinkerton—a Washington insider who helps you position yourself in today’s battles between Red and Blue. Perhaps most important, he shows how you can, indeed, should shape as well as spot money-making trends. — Doug Bandow, Senior Fellow at the Cato Institute. 

“Where the business climate and the political climate come together, opportunities are to be found—and when the subject is political and economic climate change, James Pinkerton knows which way the winds are blowing.” — Michael Lind, author of Land of Promise: An Economic History of the United States.

“Jim Pinkerton, widely reputed to be the smartest man in Washington, has always had an uncanny ability to see around corners. Now future-minded readers can profit from Pinkerton’s boundless curiosity, voracious reading, brilliant synthesis, and visionary insight. And despite the book's unflinching prediction that Red America and Blue America are becoming opposed and incompatible tribes, there’s comfort in the conclusion that the country ultimately can live with its differences -- and that wise investors will reap benefits from the new national arrangements.” — Geoffrey Kabaservice, Vice President for Political Studies at the Niskanen Center

“If America remains in a hopelessly polarized Blue State, Red State American condition today, is a rapid destructive decline inevitable? In his new book, Directional Investing, Jim Pinkerton boldly demonstrates how America remains a land of unique opportunity—as a result of its diverse opinion, population and unique constitutional system.  If we direct our divergent perspectives toward more creative entrepreneurial targets. Our differences may actually uncover dramatic, exponential breakthroughs in healthcare, energy, education, longevity and prosperity instead of wasteful destructive debate.”  — Clara Del Villar, Founder, CEO Schola Labs

“Drawing from an entertaining mix of popular culture, history, technology, and public policy mayhem, Jim Pinkerton's new book will shock and delight its readers. Pinkerton delivers an insightful, forward-looking view of the forces shaping America and its future. You don't want to be the last person to read this book!” — Jim Carter, past appointee to senior positions at the  White House National Economic Council, the Departments of Treasury and Labor, and the Senate Budget Committee 

"James Pinkerton is one of the most creative analysts I've encountered in my career in public policy. The Secret of Directional Investing will make you consider larger trends you haven't thought about before. " — Avik Roy, Policy Editor, Forbes

The Argument of The Secret of Directional Investing: Making Money Amidst the Red-Blue Rumble

* The Secret of Directional Investing begins with the basic point, The trend is your friend.  That is, go with the directional flow of money.  The challenge, of course, is know the trend, to see the direction. 

* Directional Investing starts with the realization that cultural and political trends drive investments, and that those trends can be shaped, not just spotted.  You can make money either way.  This is outlined in the Introduction and detailed in Chapter Nine. 

* For example, the red-blue, polarization, is a trend to be spotted.  It’s happening out there.  Ask Bud Light.  But it’s more than just beer, it’s Disney, Target, Kohl’s, Planet Fitness, and BlackRock.  All of these are companies that aim for a national market, and yet they went woke.  And now that’s costing them, in terms of brand damage, even outright boycotts.  Not in the whole country, but in parts of it.  That’s the challenge companies face as they eye the national market: If they wish to be blue, that’s fine, but they’ll lose ground in red.  Can they be purple, or gray, and appeal to the whole country?  This conundrum is detailed in Chapters Six and Seven. 

* So again, investors should be mindful—the stock price of Disney, for example, has fallen 40 percent in the last three years. If you knew about that trend, and had shorted the stock, you’d have made a lot of money.  Sometimes the trends are counter-intuitive.  For instance, despite all the talk about green energy, the stock price of Exxon is way up. Yes, the media coverage has been green, about the inevitability of green.  And yet the consumer reality has been black—oil black.  So the key is to figure out the trend—and now, amidst the red-blue rumble, what will happen to, say, electric vehicles?  Chances are they’ll split regionally: the blue states will move ahead with EVs, while red states will move the other way.  With that in mind, is the price of Tesla correct?  Or GM?  Or Toyota?  Spot the trend, think it through, make money.

* And yet polarization is also a trend to profit from, because it will accelerate the process of building parallel market leaders.  And so that means incumbent market players will fall (time to short!) and new market players emerge (time to go long!).   In addition, as the central government weakens, states will try new things, creating new opportunities in the form of enterprise zones (think Nevada and gambling in the 20th century, as detailed in Chapter One) for everything from health care to rocketry.  As with splitting the atom, the release of energy across the economy will be enormous.  This is the point of Chapter Eight.

*  One of the key themes of the book, as detailed in Chapters Four, Five, and Six, is that the states going their own ways—states as “laboratories of democracy”—opens up vistas for arbitrage.  Hence Chapter Six is entitled “The United States of Arbitrage.”  A state such as California might offer subsidies for green energy, which is bullish for that sector, while a state such as Texas has no state income tax, which is bullish for savers and investors. 

* On the other hand, some trends can be shaped.  Directional Investing features a history of how governments have created new environments that made money for investors.  For instance, back in 1931, Nevada legalized gambling—and we all know what has happened since: Vega$.  So now, what could a state do on its own?  Could it be like Texas and Florida, enticing businesses and people with lower taxes?  Or could it be like Wyoming, encouraging banking privacy and crypto?  Or could it do something really daring, such as declare itself to be an FDA-free zone?  For sure, that would be a fight with the federal government, but the feds haven’t exactly demonstrated their medical expertise, have they? In a country as big and diverse as this, do we really think some bureaucrats in Silver Spring, Maryland know what’s best for all 340 million of us?  Shouldn’t there be more allowance for what Justice Brandeis, an historic liberal, called “laboratories of democracy”?   Moreover, in these  polarized times, when governors are routinely defying Washington, DC, there’s an excellent chance that a state could win its break for freedom.  This point is developed in Chapter Thirteen. 

* As Directional Investing points out, it’s likely that new federalism, or states’ rights, will necessitate the two colors, red and blue, forming blocs.  That is, there’ll be a red bloc and a blue bloc.  E pluribus duo.  Same 50-state union, just a substantial subdivide.  And out of that, of course, will come beaucoup arbitrage opportunities for investors.  Go to California for your green energy subsidy, go to Illinois which aims to be a hub for transgenderism.  And then go to Texas for your gun, and to Florida for your tax cut.  Win-win!  

* And yet at the same time, this book offers a plan toward the win-win reduction in polarization.  That is, if the country splits, gently, while preserving the union, there’ll be room for experimentation, arbitrage, and greater prosperity. A win-win for investors, and for all Americans.  

* In fact, the last chapter of Directional Investing, Chapter Sixteen, includes a discussion of a new model of politics, based less on pledges for specific issues.  That is, new technology makes it easy to get granular if a voter wishes to bargain his or her vote for a specific cause.  Nothing crooked, nothing coercive, just  way for the voter to make it plain what he or she wants.  So that’s how you really shape a trend. 

* Using this approach, investors could shape trends on good investments.  And why not think big?  The bigger the delta, the bigger the alpha.  Big returns come from big things.  Making money any legal and ethical way is fine, but it’s also true: Fortune favors the bold.

* In U.S. history, we’ve seen this political frameworking of trends on behalf of the railroads, for cars and highways, and, most recently, the internet.  In their respective eras, all were great investments.  And now, as the book points out, we’re seeing on new transportation modes, such as bicycles, micro-mobility, and transportation-as-a-service (scooters, Uber).  And we can see new trends to shape.  For instance, as an alternative to wind and solar, burn more carbon fuels, along with carbon capture, being mindful that carbon capture can include not just trees, but also new kinds of manufacturing.  So, as detailed in Chapters Eleven, Twelve, Thirteen, Fourteen, and Fifteen, a win such as water desalination, carbon capture, crypto, medical innovation, and space launching. 

* This book argues that investors, and all of us, need liberty, because liberty is an economic bazooka.  Only liberty makes room for our diversity—including the all-important diversities of imagination and energy.  And yet at the same time, we need order, because our persons and property need predictability.  There’s a tension between liberty and order, but there’s also an energy.  The preceding pages have outlined ways of putting the two concepts together, building Frameworks for growth, jobs, national strength, human betterment—and, yes, greater investment returns.  This is detailed in Chapters Two and Three. 

* Imagining precedes investing, and yet historical perspective helps. History is a series of case studies, all of which offer lessons about what works, and what doesn’t work.  Knowing that the trend is the friend, the investor will wish to spot trends and ride them upward.  The trend might, for example, be an S-Curve.  But where, on the S-Curve?  The steep part?  Or the flat part?  It pays to be able to notice the difference.  

* So yes, noticing is important.  The 2024 elections are likely to be such a mess that no matter who is judged to be the victor, half the country will be furious.  But Directional Investing says, Don’t get mad, get rich. See t anger coming from the election to spot the trends, starting with red vs. blue.  For example, if BlackRock has become BlueRock, that suggests there’s an opportunity for a non-woke RedRock.  So there’s an investment: to see the emerging financial hubs of Dallas or Miami.  And if you’re not sure which stock to pick, just buy real estate!  Same with a possible Health Freedom Zone that could emerge in a red state that cancels the FDA.  Just own land nearby the local hospital, you’ll do fine!   

*Yet at the same time, Blue has plenty of resources, too, such as Tech and AI.  So there’s plenty of reason to think that in the coming red-blue split, Blue will do fine.   More than fine.  Each side of the divide can live and let live, and invest and grow rich.  

* Everyone making money is the best alternative to the hard feelings that can come from politics.  It’s the bridge over troubled troubled waters. 

* Some will wonder: Is the polarization of the United States, red against blue, a bad thing?  Let’s let others decide whether it’s desirable or undesirable.  Maybe it’s simply inevitable, given the stark differences, Red and Blue, in the American population.  But in the meantime: let’s take note of the upside for investors.  And let’s further observe that capitalism and entrepreneurship offer the hope for a reconciliation that comes from voluntary market transactions, as opposed to political forces.  That is, economics is more peaceful than politics.  Make deals, not war.  

* Started out writing on investment, and think larger about national peace. Thinking about a framework for investments, the way the railroads were done—and now, I’m thinking that if the goal is to stave off a civil war, the idea has to be that you’re creating two frameworks, two havens, for investment, albeit of different kinds, one red, one blue. Live and let live is, among other things, a good business model. 

* Sometimes, in politics, peaceful compromise is not possible. That’s why Clausewitz defined war as politics by other means.  So sometimes it helps to change the subject!  Make money not war, is better. It’s a new kind of civics, based on capitalist win-win. Much better than hodgepodge rule by committee.

* Right now we have a national wet blanket, a kind of lowest common denominator—what we need are higher common denominators, one red, one blue—the competition will be good. 

* America has been so successful, it’s time to split the stock!  The answer is that two sizes fit all, one red, one blue. 

* According to a 2023 Pew poll, only 16 percent of Americans have confidence in the federal government.  At the same time, a 2023 Gallup poll shows that Americans have more confidence in local government.  So what does that tell us about where the main governing effort ought to be? 

Bloomberg News joins greens in talking down carbon fuels. Is that good or bad investment advice?

 

The news coming out of the COP 28 climate change conference in Dubai has been mixed.  Plenty of headlines have evinced green despair.  From a hardcore "fundamentalist" green perspective, the talks were a disappointment, even a disaster.  For instance, former vice president Al Gore thundered that the text, "reads as if OPEC dictated it word for word."    For sure, there were a lot of OPEC and oil types were at COP, including, of course, those from the host country, the UAE.  Sample headline from The Washington Post: "Oil, gas and coal interests swarm global climate summit in Dubai."  

Yet in the end, on December 13, COP gutted out a statement that seemed to please corporate greens, at least.  Here's the Bloomberg News writeup: 

While the outcome falls short of the specific fossil fuel “phase out” most countries wanted, it does break new ground: No previous COP text has mentioned moving away from oil and gas, the fuels that have underpinned the global economy for decades.

Whereupon Bloomberg wrote of "language pushing a decline in fossil fuel use [that] will send a signal to investors about the future of energy markets." Pressing the point was Jennifer Morgan, the German delegate:

We now tomorrow move forward in implementing this.  Every investor should understand now that the future investments that are profitable and long-term are renewable energy — and investing in fossil fuels is a stranded asset.

Can Germany make those words stick?  The country isn't anywhere near the economic and political power that it was even five years ago--and neither is the European Union.  All this green "Hobbit"-type thinking may improve the ecological soul, but it's hell on economic vitality.   (In the meantime, of course, Germany is burning more coal.) 

Morgan's words are more than just brave optimism--they are also expressly designed to talk down carbon-energy viability. That is, by applying the "wave of the future" framing tactic--you have to be on the right side of history! you can't fight the inevitable!--she and her allies seek to depress carbon-fuel investment and make the "stranded asset" prophecy self-fulfilling.  Morgan obviously has an ally in Bloomberg News. 

Will Morgan, and Bloomberg, succeed?  This author thinks not.  Why?  Because the value of all the oil, gas, and coal around the world is to be measured in the quadrillions of dollars (that's 15 zeroes).  And people tend not to overlook things of value--that's why capitalism works so well, and so efficiently: If it has a value, or could have a value, some capitalist is on it.

The Germans, gloomily processing their tortured history, might be happy becoming poor, and they might even drag the EU with them, but the rest of the world won't agree. The ROW includes, for sure, China and India, as well as other big countries in Asia and Africa.  Most of them, in fact, are still using coal. And #resistance to the long march to the green Finland Station probably also includes the United States, where substantial opinion now regards Al Gore-type greenery as a hoax, or at least a con.  (One needn't have an opinion on the science of climate change to nonetheless be a skeptic on the proffered solutions--most of which seem to involve subsidies to solar- and wind companies.)

So the Directional Investor sees this as a contrarian opportunity--go long on carbon fuels. Soon enough, the politics will catch up, as carbon fuels are protected.  Ideally, we'll have carbon capture, as part of a Grand Carbon Bargain.  With that, we'd have all the appurtenant industries that can come from carbon usage--carbon being, after all, a wonder element.  So a whole second industry of carbon capture could emerge alongside the ongoing industry of carbon extraction.  The value of all this would be in the quadrillions, too.  What goes up must come down--and a good thing.  Here's the circular economy.  

We could even use captured carbon to make islands, as argued here. In fact, there's a whole book, which I have co-authored with Dr. Joyce Starr, outlining the potential of carbon capture to build new things, including peace in the Middle East.  

 

“Go Full Republic” And Find a New Direction

Reacting to the news that the Democratic governor of New Mexico, Michelle Lujan Grisham, has issued an “emergency order” banning the open carry of guns in her state, on September 10, the tweet account TimOnPoint offered a startling prediction/suggestion: 

If the Governor of New Mexico can void the Bill of Rights, what’s stopping the Governors of Idaho and Texas from expelling the FBI and ATF, or Alaska allowing new energy production without the consent of the DoI, DoE and EPA. Let’s do this - go full republic.

That’s a powerful phrase: “go full republic.”  That is, reassert the small “r” republican features of our Constitution, implicit in the whole document, but spelled out explicitly in the Tenth Amendment.   And it’s full of investment implications.  

Imagine: If New Mexico can go its way—and for sure, that’s an if, based on any number of legal and political factors—then why can’t other states go their way?  Why can’t Idaho follow through on its aimed-for annulment of federal gun control laws?  Why can’t Alaska reclaim its sovereignty over energy matters?   Indeed, even if Lujan Grisham is slapped down—the Second Amendment is, after all, a part of the Constitution—what about other states to do other things that are more in the gray zone?   For instance, the regulatory power of the Bureau of Alcohol, Tobacco, and Firearms, and the Environmental Protection Agency is not in constitutional, their power is statutory and administrative—and those are lesser powers.  That is, for the ATF and the EPA, Congress passed a law, and the administrative state has taken it from there—to the point of excess, in the view of the Supreme Court in a quartet of recent decisions.

Sometimes it has seemed as though federal power was a ratchet.  That is, once federal power was gained, it could never be lost.  That was the progressive party line.  But that’s been proven not to be true.   To be sure, federal power was most definitely on the upswing for much of the 20th century, but in the 21st century, governors have been reasserting their powers, on matters ranging from schools to abortion to climate change to sanctuary cities/states.  It’s worth emphasizing that it’s not just red states being anti-federal government, it’s been blue states, too.  As T.S. Eliot once wrote, there are no lost causes—and no won causes.  In the course of human events, everything is always in flux.   

But to say that there’s no ultimate direction—the arc of the universe doesn’t bend any particular way—is not to say that there aren’t directions.  That is, just because we can’t say that there’s a grand ultimate direction doesn’t mean that there aren’t directions in the meantime.  This is the point of Directional Investing: There are plenty of trends, and the trend is your friend.   These trends can be spotted, and sometimes perhaps shaped.  

This author has been writing writing for years that the trend of our time is going to be the further expansion of federalism—or, to be blunter about it, states’ rights.  That is, states making their own decisions, based on their heightened awareness that the federal government makes for a poor one-size-fits-all.   And yes, our small “r” republican government—our Constitution—makes that all the easier, as the states are the natural form of compartmentalization, enabling them to be, as Justice Brandeis wrote nine decades ago, “laboratories of democracy.” 

So what would happen if the states really went their separate ways?  Shaping their own destiny?   If New Mexico could make a ban on guns (at least open carry, although who should doubt that other states would go further if they could) stick?  And if Idaho were to go the opposite way?  And what if Alaska were to go all-out-Palin, on “drill, baby, drill”?  There’d be a lot of diversity, that’s for sure, and also, a lot of economic opportunity, as investors reacted to, and perhaps helped shape, the new rules.  It would help make the laboratories of democracy into laboratories of prosperity.  

To point to one salient opportunity, what if a state were to suspend the onerous regulatory strictures Food and Drug Administration, as I have argued, here and here?   At a time when public confidence in the public health establishment is at an all-time low, now could be the time to strike.   The country as a whole might not be emphatic in its loss of confidence in Big Health, but you can sure bet that many states are.  And that's the the genius of federalism: What's needed is the will of a single state, operating through democratic republican principles, to make a change.   There would undoubtedly be controversy and court challenges and , but then, today, there's controversy and court challenges about everything.  If a state could get out from under the wet blanket of the FDA, imagine the economic boom.  The state being to medicine and medical innovation as Nevada is to gambling.  If you build a medical enterprise zone, they will come. 

So why aren’t we doing it?  Well, maybe we’re in the process of doing that now.  Maybe we are opening our eyes.  Maybe it’s the process described back in the 16th century by the Frenchman Etienne de la Boétie, in his essay, “The Discourse of Voluntary Servitude.”  As the title suggests, the servitude is often in our heads.  One needn’t minimize the power of state power—soldiers, guns, prisons—to nonetheless see that a population suitably animated can find ways to stage a rebellion (hopefully peaceful) against tyrannic power.  As Boétie wrote:

Obviously there is no need of fighting to overcome this single tyrant, for he is automatically defeated if the country refuses consent to its own enslavement: it is not necessary to deprive him of anything, but simply to give him nothing; there is no need that the country make an effort to do anything for itself provided it does nothing against itself. It is therefore the inhabitants themselves who permit, or, rather, bring about, their own subjection, since by ceasing to submit they would put an end to their servitude. A people enslaves itself, cuts its own throat, when, having a choice between being vassals and being free men, it deserts its liberties and takes on the yoke, gives consent to its own misery, or, rather, apparently welcomes it. 

So there we have it.  Some people think the status quo is fine.  And perhaps, nationwide, they're a majority  (although I doubt it).  But the Constitution protects minority rights, and sees the states as a great bulwark of minority rights.  So if, in a state, we no longer consent to the current regime of petty suppression, if we no longer welcome it, we can, working through the states, end our subservience.   And that’s a cause worth winning.  And along the way, there’s be money to be made.  

Update: On September 11, the FDA once against gave an emergency use authorization for a new Covid vaccine.  That is, all the trials and red tape are waived.  It makes a difference that the FDA really believes in the urgency of vaccines, whereas other medicinal drugs, not so much.