Methods Unsound
Monday 17 March 2025
I
The attack currently underway on American institutions and government agencies from the Trump administration certainly exceeds any previous examples of aggression from the executive branch. Cold Eye Earth is more typically focused on energy and economic policy, and like most other observers in this space did not find it hard to anticipate the ways the Trump team could damage the EPA, and cut into regulations in everything from vehicle emissions to natural resource extraction. But the speed at which the new administration has quickly upended the post-war order in the West, incoherently applied a range of tariffs to friendly trading partners, triggered massive uncertainty for the American business sector, tested the boundaries of constitutional rights, and unleashed a strange, almost eerie hostility upon Canada in particular, has much of the country up in arms—including many who voted for the President.
Readers of Cold Eye Earth probably don’t need to be told this, but, the problems and potential crises being put in motion right now greatly overshadow impacts to climate policy. You should pay attention, for example, to a new line of attack coming from the executive branch against the nation’s universities, and especially its research universities. To explain, the US has 187 research universities that carry an “R1” designation, a class of institutions that the Carnegie Foundation cultivates through their education classification process, that denotes those universities receiving the highest levels of research funding. There are about 52 of these in the private category—names like CalTech, Northwestern, Rice, Carnegie Mellon, Rensselaer Polytechnic, Cornell, Brandeis—and the rest are public institutions, like the University of Michigan, UC Berkeley (indeed the entire UC system), and the University of Texas. The R1 model has worked beautifully for the country.
These institutions pull in large amounts of funding from the government (and private industry too), and that helps attract graduate students from both the US and around the world who come to work in campus institutes, or under professors in their labs, on just about every imaginable aspect of scientific inquiry. Yes, there is funding for research in the humanities, but the big activity courses through all the scientific fields and at the end of the journey the country receives a payoff: significant contributions to medicine, genetics, engineering, technology, computer science, health, and so much more. It’s typical for graduate students coming out of R1 universities to start companies, to create breakthrough products, or to seek employment with many of the nation’s leading edge companies. The US economy is inextricably tied to this system and it’s not hard to understand why.
Now imagine cutting that funding. This is what the Trump administration has just done to Columbia University in New York ($400 million), and Johns Hopkins University in Baltimore ($800 million). A brief word about Johns Hopkins: the university, which is heavily organized around medical education and research, has been in partnership with the federal government for many decades (if not longer) and is regarded by some as the first research university. Alot of the health research that benefits the US military takes place at Johns Hopkins, for example, and its impact on the government is so vast and important it’s impossible to list all of its contributions. If Johns Hopkins didn’t exist, the government would have to invent it.
Because individual stories sometimes more effectively transmit the import of this unfolding disaster, the Wall Street Journal ran a story on the research cuts which are fanning out now across the US educational complex, reaching far beyond R1 universities.
Gracie Hines was preparing to accept a pharmaceutical-sciences doctoral program offer at West Virginia University when on March 3, the university rescinded her admission. The email notifying her of the withdrawal cited unforeseen budgetary challenges from proposed federal research-funding cuts.
“It felt like all the work I’ve put in these last few years was worth nothing,” said Hines, 20, who is finishing her undergraduate degree at WVU in biochemistry. “I was really heartbroken and sad about it.”
By the way, for readers outside the country, the Wall Street Journal has long been our business-friendly national publication, occupying a position similar to the FT. More importantly, it has consistently been governed by a very conservative editorial board. But lately, especially in the last eight weeks, the paper has become not just uneasy towards the administration’s incoherence, but openly critical. That’s a sign. What’s a good marker for how much the WSJ has been critical of Trump? The president is quite angry at the paper now, and has said so in one of his usual rants. From the story at The New Republic, Trump Loses It After Wall Street Journal Trashes His Economic Policies:
Trump raged in a post on Truth Social.
“Their (WSJ!) thinking is antiquated and weak, and very bad for the USA. But have no fear, we will WIN on everything!!! Egg prices are down, oil is down, interest rates are down, and TARIFF RELATED MONEY IS POURING INTO THE UNITED STATES. ‘The only thing you have to fear, is fear itself!’”
Trump’s absurd meltdown appears to be in response to an article published Thursday in The Wall Street Journal airing the concerns of American business leaders who have been forced to come to terms with just how disastrous Trump’s tariffs are for the U.S. market.
Trump could also have been blowing up in response to a Fox Business interview Thursday with the Journal’s editor in chief Emma Tucker, who discussed the article and described how the once “upbeat” attitude American business executives had about the Trump administration had gone sour since the World Economic Forum in Davos in January.
II
About two years ago I put together a presentation that attempted to capture how the United States was undertaking energy transition, in the context of the country’s historical inclinations. The audience was located abroad, and wanted perspective. I suggested the American way was best articulated by Buckminster Fuller, who explained that it was generally more optimal to create new institutions, new technology, and new products rather than trying to reform incumbents. This is a technology-forward philosophy that’s reflected, for example, in the US approach to EV adoption: all carrot, no stick. This is in contrast with the European approach which uses both carrots and sticks, incentivizing new EV purchases, but also curbing, paring back ICE sales, and ICE miles driven.
Most of the American business community was expecting the new administration to begin with a go-go declaration that leaned in this very direction. Kicked off by deregulation, some financial market loosening, and presidential orders that would signal a range of business-friendly legislation, the US stock market roared after last November’s election. However, you will never guess what happened next.
Shortly after taking office, the order of operations—the sequence, if you will—that the new administration chose to follow looked nothing like what supporters had anticipated. With the exception of the initial AI supercluster announcement, the Trump team then veered off into a highly irregular series of trade threats, tariff declarations, loose and hostile diplomatic gestures towards Ukraine, and our allies, and then proceeded to start mass firings across the government employee sector. Not to mention the absolutely bizarre entreaties coming from the President to incorporate both Canada and Greenland into the US—regardless of the sovereignty of both nations.
The vibes coming from the financial community eventually erupted last week. Fox News business reporter Charles Gasparino reported that deal-making, business planning, and other business ventures had essentially seized up under the weight of so much uncertainty. “Impossible to make any plans” is the message that started to come through. CNBC, the around-the-clock market coverage network which had been very friendly to the prospect of another Trump term until the inauguration, also began to lose patience. Steve Liesman, the economics correspondent who has been on-air with CNBC for nearly 25 years, stopped pulling his punches:
“I’m going to say this at the risk of my job, but what President Trump is doing is insane,” Liesman, CNBC’s senior economics reporter, said during a segment on the cable channel Tuesday. “And now he’s saying he’s putting 50 percent tariffs on Canada unless they agree to become the 51st state. That is insane. There’s just no other way of describing it.”
III
There is perhaps no greater development imperative in the United States right now than the need to increase power supply. Just about every analyst sees clearly that data center growth in the near term will primarily take place in the US, that total generation is finally growing again, and that it’s going to grow alot between now and 2030. Mind you, this will all unfold as we lose more generation capacity from retiring coal, thus making newbuild all the more important. As Democrats discovered however, during their last four years in office, the power sector is overregulated, and better at creating bottlenecks and logjams than ushering in development. Here, we have an exceedingly rare bi-partisan agreement that the country needs to expand its grid. Moreso, the bulk of the nation’s utility experts, CEOs, and other professionals also agree on an all-the-above strategy, and the distaste for wind and solar that may lie within the administration is not shared by the private sector. For newbuild, the Trump administration has been informed by the industry multiple times that wind, solar, batteries are just as important as newbuild in natgas. So here, on this rather important mandate to spur industrial development, where is the leadership? Where is the policy? How are you going to get anything done, let alone expand the grid, if you attach a tariff to millions of inputs from the global supply chain?
Trump’s popularity is now understandably taking a big hit, as he is losing the support of business leaders, financial market traders, veterans let go from government jobs, and especially rural voters who supported him but are seeing their lives disrupted. Nate Silver, who is still in the political polling game, notes that Trump’s popularity decline is quickening. He additionally makes the most basic but important of observations:
The implicit bargain of Trump for swing voters is that he'll run a good economy and then do a bunch of culture war stuff you can take or leave, but the libs will freak out about. If the economy is tanking for reasons that are largely his fault, that case is much less persuasive.
The creeping loss of confidence has also been set in motion by the disastrous public appearances of Trumps’ Secretary of Commerce, Howard Lutnick, who manages to say some of the dumbest, most economically incoherent things imaginable. Just a few weeks ago for example, Lutnick said to an incredulous panel on CNBC that one of the ways to think about an independent America, far less dependent on foreign trade, is one where the country could proudly again make its own t-shirts, sneakers, and towels! One is reminded of the parable of the toaster, in which a person uneducated in economics imagines that the country would benefit if we only brought toaster manufacturing back home.
Analysis of irrational people and their intentions is exceedingly difficult, and in Trump we are faced with a kind of mad king, impervious to explanation. That said, readers are encouraged to review the record of President William McKinley, who was in office from 1897-1901. You have no doubt heard about Trump’s fondness for McKinley and his tariff regime (which was a failure by the way). What you may be less familiar with is McKinley’s expansionist record, and his annexations of the Philippines, Hawaii, Puerto Rico, and Guam. If Trump has fantasies or other delusions of grandeur, he may be quite animated by McKinley’s record and that would go some distance to explain his verbal aggressiveness towards Greenland (a territory of Denmark) and the Panama Canal Zone.
We can pair this of course with a general through-line that frequently appears from Trump world that the post-war order has reached its expiration date, that the US no longer wants to police the entire world, and that we should admit that China and Russia are great powers, and we should cede to them their respective hemispheres. In such a formulation, Trump doesn’t mind at all if Ukraine falls to Russia, or if China takes back Taiwan. Go ahead, you can hear him saying. But he follows this up with, by the way, in my hemisphere, I want to grab Greenland, the Canal Zone, and I might even want to annex Canada.
We might go further with this theory and suggest that Trump may care much less about the economy in the medium term, cares little if not at all about the fortune of Republican members of Congress who are all up for election again in a year and a half, and may only be concerned with his legacy and greatness. Again, any analysis of Trump is exceedingly difficult and prediction of his future actions and leanings almost impossible. (Those who have tried litter the ditches, on each side of the road). But, here in the second and final term, Trump’s private definition of Make America Great Again may be deeply bound up in an unsurprising, narcissistic self-regard that is everywhere and always about himself, and his imagined legacy. One is reminded of the final scenes of Apocalypse Now, when Martin Sheen playing intelligence officer Captain Willard, is sent on a mission to kill Colonel Kurtz, and finally confronts him at his jungle headquarters up a deep river on the Cambodia-Vietnam border. Kurtz, played by Brando, has clearly gone mad:
WILLARD: They told me you had gone totally insane. And that your methods…were unsound.
KURTZ: Are my methods unsound?
WILLARD: I don’t see any method…at all…sir.
Politics and markets tend to merge during periods of upheaval, and the rapid correction in US equities has driven alot of commentary out into the open. As Cold Eye Earth began to explain after the election, presidents cannot defy gravity forever, and market realities will eventually intrude. Michael Cembalest of JP Morgan also let loose last week, when he published the following passage in his daily note. The double entendres, and the implied meanings, are glaring and poignant:
Here’s the interesting thing about the stock market: it cannot be indicted, arrested or deported; it cannot be intimidated, threatened or bullied; it has no gender, ethnicity or religion; it cannot be fired, furloughed or defunded; it cannot be primaried before the next midterm elections; and it cannot be seized, nationalized or invaded. It’s the ultimate voting machine, reflecting prospects for earnings growth, stability, liquidity, inflation, taxation and predictable rule of law.
Cembalest is also the analyst behind JPMorgan’s annual energy report, and readers will not be surprised to learn that his views overall on the current pace of the energy transition are similar to the view offered here, at Cold Eye Earth. We will review that report in a coming issue. But the takeaway readers should take from the short note cited here is that Cembalest is citing “rule of law” her quite intentionally, and he chooses that concept to round out his thoughts. Nota bene!
There are many challenges to energy transition but surely one of the most widely accepted hurdles is the transformation of industrial works, in everything from cement, to steelmaking. Few think that electrification itself, even if driven by rapidly falling costs, will easily transform non-electrified sectors quickly. It was quite surprising therefore to read a WSJ Op-Ed from two Oxford professors, Eric Beinhocker and J. Doyne Farmer, claiming that at present rates of renewables growth and cost declines, that renewables will largely displace fossil fuels by the year 2050. Let’s examine the exact quote:
The energy provided by solar has been growing by about 30% a year for several decades. In theory, if this rate continues for just one more decade, solar power with battery storage could supply all the world’s energy needs by about 2035. In reality, growth will probably slow down as the technology reaches the saturation phase in its S-curve. Still, based on historical growth and its likely S-curve pattern, we can predict that renewables, along with pre-existing hydropower and nuclear power, will largely displace fossil fuels by about 2050.
No, not a chance. Renewables along with pre-existing hydropower and nuclear power will have largely decarbonized the global power sector by 2050. Yes, even when assuming the Additive Model of energy transition, the longrun decarbonization of power (say, with a remainder of 10-15% natgas) is going to happen around mid century. But there is little prospect that all the processes that rely on industrial heat will be decarbonized by 2050, and that applies to transportation too—especially aerospace.
A red flag in the Op-Ed is the way the two authors repeatedly invoke Moore’s Law and the cost declines of wind and solar, and allow these concepts to undergo slippage, buttressing their big picture view. So let’s be clear that Moore’s Law:
Absolutely applies to the manufacturing cost/output capability of technology over time.
Absolutely does not apply to the transformation of infrastructure, and the built environment.
It must be the case that both Beinhocker and Farmer have a stack of academic research they’ve produced over time, and no doubt they have views that are more nuanced and sophisticated, that cannot easily fit into an Op-Ed. Indeed, the theme of their Op-Ed is that the energy transition is unstoppable, regardless of policy, because of price and costs. Here, Cold Eye Earth is in full agreement with that general arc. However, it’s a black mark against the authors that they published what is clearly a grand if not grandiose claim. Let’s make this plain, therefore. Even if wind and solar and battery storage were free, that would still not solve the problem we face in the industrial sector, which is resistant not to cost declines, but resistant to electrification itself.
—Gregor Macdonald