Elon Musk is in the Electric Grid Business – Not the Car Business

it’s eric garland here welcome back to the garland report future trends what’s going on in the world how to think about it what you should do about it always happy to be with you i’m frustrated today guys i want to talk about something i want to talk about this elon musk and tesla people driving me crazy they don’t get it people they just don’t understand they’re so confused it’s an electric car it’s like a golf cart he’s opening a a battery store he’s making a gigafactory what does it all mean it’s all so confusing to me oh frustrating sometimes here’s what’s going on guys peak oil i said it peak oil oh had we stopped talking about that did mouthy people on wall street go look it’s the golden age of petroleum in north dakota , 3 secondsah do we have to cover this again guys every time a bubble blows up they got to replace it with a new bubble , 10 secondsbecause the boomers want to retire after the dot-com thing blew up we did war and security and we did , 19 secondshousing the housing blew up because there was no actual growth behind it it blew up , 28 secondsand then we’ve gone into junk bonds which has led to fracking because energy went from six percent of the junk bond , 37 secondsmarket to fifteen percent of the john barron market uh so fracking came online and we dumped , 44 secondsmassive amounts of 13 loans 15 loans to get all those spigots dug into , 53 secondsnorth dakota and texas and oklahoma uh we also have been piling money bubble style , 1 secondinto whatever might be the next technological disruption but it hasn’t gotten away from some classic things such as , 10 secondsit’s more expensive to dig oil out of the ground than it used to be when you were a kid , 19 secondsand a barrel of oil was 12 bucks or eight bucks or 18 bucks that’s in constant dollars don’t lecture me back , 27 secondsthen a dollar was worth more i do this for a living i know that so here’s what’s going on baby peek oil , 35 secondswe really topped out for the most part globally in about 2005 to 2007 , 44 secondsand the cost of extracting oil has been getting higher because we dug out , 52 secondsmuch of the easy stuff and we got to go for the tight oil and that is what the fracking play is , 59 secondstight oil it’s down there you got to get it and so um through the magic of junk bonds we have been , 8 secondsturning on a bunch of casino gamblers to stick holes in texas and north dakota and elsewhere and yes it flooded the market , 17 secondsbecause demand didn’t go up okay there has not been consumer demand to go , 25 secondsalong with it so when you suddenly on a bunch of credit cards dig out a bunch of tight oil faster than , 34 secondsyou used to and there isn’t demand why supply increases and i don’t know how many of their out you out there of , 42 secondsyou took economics 101 that makes the price fall now it’s a global market so there’s , 50 secondsyou know the dubai crude there’s opec produced crude and they have different prices at times but , 57 secondsthey’re all kind of linked and um little birdies tell me that the saudis love the idea of our fracking operations , 5 secondsgoing out now i’m gonna bring this back to elon musk and tesla don’t you worry but here’s the gig guys , 15 secondspetroleum is going to be harder and harder to get and that’s the peak oil part it’s not as , 23 secondscheap as it used to be to get it which is why we deep we uh dig the deep horizon well , 31 secondsin the bay of mexico that blew up that’s why we were fooling around down the bottom of the ocean long , 39 secondslong ago are the days of the beverly hillbillies where we just uh be shooting from muskrats , 47 secondsand oil come a bubbling out of the ground uh one of the first places they discovered petroleum was in pennsylvania , 54 secondsfarmers were noticing petroleum bubbling up through their farm fields they’re like drat it’s no good darn it i got too much petroleum on my , 3 secondsland is the last time anybody said that uh it used to be much easier to get to petroleum , 12 secondsand that’s what the peak part is about everybody misconstrues the argument they don’t look at how much oil is coming out , 19 secondsof the ground compared to 20 years ago compared to 10 years ago how long does a well , 26 secondslast in production what’s its rate of decline they avoid all that tough stuff because it’s just we love the scoreboard , 34 secondsgoing up it’s getting we got more m-o-a-r more we’re gonna have more more , 41 secondslove more cheaper well maybe not cheaper but more more expensive higher prices higher profits more more more , 50 secondsthat’s a that’s a story we like a lot better than the well there’s we still find ways to get petroleum but we got to get more clever , 59 secondsabout it than we ever used to and yes there are economies that are still using petroleum , 6 secondsmore and more every day to demand for it in developing economies industrializing economies of , 14 secondsindia and brazil and places like that so here’s the thing how does this relate back to electric , 22 secondscars and batteries and all this crazy magical stuff that elon musk is doing the big boys that are making the real , 31 secondsplans they know it’s going for king grid you’re getting on the grid baby , 38 secondsall you libertarians with your daniel boone skin caps you’re going off the grid with your bar of gold and you’re signed books from glenn beck , 47 secondsyou’re going off the grid everybody else is going on the grid electrical grid why , 54 secondsit doesn’t make sense to run an economy based on liquid fleet fuels that are very likely to be in , 3 secondsshorter supply over time that are likely to have events where the price fluctuates greatly , 11 secondsoh cheap oil scares um people like the airline companies and the transit companies all those people that deliver your boxes , 20 secondsfrom amazon that scares them too you know because they can’t rely on it and when , 28 secondsyou have dwindling cheap supply that’s that’s the point the cheap supply because remember for them , 37 secondssaudis with the gold toilets and the gold bmws their cost of extraction is about 16 bucks a barrel , 44 secondsso even if it drops to 44 dollars a barrel saudi’s still buying gold toilets fracking costs 76 , 53 secondsdollars a barrel on the median that means there’s some plays that’s 40 or 50 bucks to get out and there’s some that’s 120 to get out now when oil was over 100 not long ago that made a 76 play look pretty good , 8 secondsbut when oil’s 50 or 60.

, 14 secondsit’s not good means you’re losing money it’s very simple and the big boys that are looking at this for serious that aren’t trying to , 21 secondspump and dump stocks on a television program or something they know what’s up they know what’s going on you got solar the price of solar is , 28 secondsfalling and there’s so much innovation going on in solar you’re going to have electrical grid going to places that it’s never been , 37 secondsbefore so the future of economic development heavily implicated by this awesome , 44 secondsuh my friend josette buffa thomas who is my oldest business partner a haitian woman who calls paris her home , 52 secondsshe dedicated herself to a project called haiti future all about improving education for the , 59 secondsfuture of haiti after that earthquake took out her home country it’s all dependent on solar panels that can fire up their , 8 secondsinteractive digital whiteboards in these towns that are off the grid they can bring the grid cheaply , 16 secondsto places that never had it and it’s going to change education it’s really really cool so solar’s got a lot of implications for renewables , 24 secondsuh you see germany’s taking the lead there 35 million or 35 megawatt , 32 secondsi believe of capacity and growing it’s not much compared to nuclear power plants and stuff but um you know , 40 secondsit’s it’s significant and growing but here’s the thing if you are making future plans real future plans , 48 secondsyou’re not doing it around petroleum you’re doing it around the grid natural gas you can still get that it’s , 56 secondsa good good deal too and it’s used to fire power plants which create grid electricity it doesn’t , 4 secondsgo into cars there’s a few buses okay it’s all the grid because you ain’t gonna get that oil , 11 secondsnot the way you used to not the george w bush way of just poking a hole in the ground and hoping , 19 secondsthe television showed dallas it’s not happening anymore he’s not going to strike it rich you want to get oil it’s going to be deep down there and there’s going to be , 28 secondsa lot of competition for it and it’s going to be hard to predict we’re not going to run out of oil that’s never been the point of peak oil , 35 secondslook it’s cheap sounds about as smart as it’s cold in one part of the the globe the rest of the globe is having record , 42 secondstemperatures but this means therefore global warming ain’t happening because it’s cold somewhere yeah good logic , 50 secondsuh just because we got some cheap gas does not mean the peak oil is not happening , 58 secondsalmost all the data suggests that uh we may come up with clever fixes on a temporary basis but , 5 secondsyou know unless that data turns around from all the actual mega fields the super fields , 12 secondsand the individual wells that are expected to pump so much per day if that decline curve doesn’t change , 20 secondspico oil has not changed and i’ll bet the guys like elon musk know where it’s going , 28 secondsthey want to be part of the change towards more economic development fueled , 36 secondsby the electrical grid wouldn’t you uh entre good entrepreneurs want to be at the place , 45 secondsof the most change with the most resources and uh elon musk is a pretty good uh , 52 secondsentrepreneur as near as i can tell oh he’s getting a battery company it’s so strange and i read in harvard business review a piece about they’ll , 1 secondnever be able to scale up tesla it just won’t work so this is my article okay , 9 secondsthe point wasn’t to scale up a really nice 85 000 sports car company so that everybody has one that’s never , 17 secondsbeen the plan if you uh follow the work of clayton christensen the point always was , 25 secondsto get in the business of electrical things smart electrical things , 32 secondsand fuel it with r d so you can take more of other people’s business you just gotta you don’t gotta win the game all , 39 secondsat once you gotta just win a part of it and fuel your next thing and uh , 47 secondsthis is why a lot of people don’t understand the facebooks the instagrams the uh , 54 secondsnetflix’s of the world but that’s stupid people don’t they’ll never be able to no they’re in the game they’re fueling r d , 2 secondsthey are developing products and in the case of getting in early in the in the business of advanced , 10 secondselectrical grid solutions like batteries for the home as if maybe hmm why would you need that oh because you’re going to have a solar , 18 secondspanel on the home oh you don’t now well you will when they get more sophisticated if you look at the , 25 secondstechnological forecasts it’s coming up so yep once again , 32 secondspeople don’t get it but that’s fine because that peak oil thing isn’t fun it’s not the casino going ding ding ding ding , 39 secondsi i struggle with this but i’m i’m feeling so zen right now it’s okay people don’t got to get it they can like , 46 secondsthe the bright shiny lights and the loudness all that uh but the future does not need our , 54 secondspermission to change our lives as we go forward it just will so electrical grid think about it