Fact or Fiction?

This post either has everything or nothing to do with investing and capitalism, but I can’t get the topic out of my mind so…

I want to ask you a couple of questions, but before I do that I want to tell you a short story. Last night I had a conversation with an old friend that lives in South Africa. He mentioned that he and his wife had been thinking of coming to Thailand on vacation, but the SA government had issued a travel warning after the riots in Bangkok, stating that it was unsafe. I present this for your perusal. Which do you think is the less-safe place?

I’m not going to answer the questions I put forth in this post for you, as my intention is not to persuade you either way, but merely to pose the questions and follow the thought process. Additionally, after receiving messages from many of you, it’s clear to me that we have some very intelligent readers here at CapitalistExploits.

How we come to think what we think, and its basis in fact or fiction, is very important.  It’s important not only for investing and running businesses, but also in our everyday lives. Pick a subject – any subject, and consider why you hold the opinions on it that you do?  Does what you think about the subject have a “rational” basis, and can it be proved?

Ok, with that lead-in I want to pose the question: What is the most dangerous form of energy in existence today?

Hundreds of thousands protest against nuclear energy

Nuclear right?

It must be. Everyone is screaming about it.  What about Chernobyl and Three Mile Island and Fukushima, and…

Below are some statistics, and since I like graphs which can give me an instant picture of the facts, I’ve included a graph on the same data too.

Energy Source Death Rate (deaths per TWh)

Coal – world average 161 (26% of world energy, 50% of electricity)
Coal – China 278
Coal – USA 15
Oil 36 (36% of world energy)
Natural Gas 4 (21% of world energy)
Biofuel/Biomass 12
Peat 12
Solar (rooftop) 0.44 (less than 0.1% of world energy)
Wind 0.15 (less than 1% of world energy)
Hydro 0.10 (europe death rate, 2.2% of world energy)
Hydro – world including Banqiao) 1.4 (about 2500 TWh/yr and 171,000 Banqiao dead)
Nuclear 0.04 (5.9% of world energy)

Data from this chart are from http://nextbigfuture.com/

This question isn’t meant to be a trick question. Does it seem reasonable that we should abandon the most dangerous form of energy production in favour of less dangerous forms?

Almost a year ago to the day the world was awash with concern over the Deepwater Horizon spill. What’s changed since then?

Second question: Why all these earthquakes, tsunamis and natural disasters? What’s going on?

The second question came about due to a conversations I had while sitting around a table of 12 adults recently. Discussion turned to the topic of earthquakes and tsunamis. Without exception everyone at the table excluding myself was of the opinion that there were definitely more earthquakes, tsunamis and natural disasters than before. My answer, not knowing factually whether there were more or less, was to define “before.” Always one to differentiate between fact and opinion, I suggested that it was my opinion that if we are to consider our own lifespan, then possibly what we are experiencing would be registering only the tiniest blip on the time-line of man’s existence on this ball of dirt; and, if we are considering the time-line of the planet’s existence, then we are registering an even more insignificant blip.

I followed this up by suggesting we find out. Surprisingly, nobody was particularly interested in finding out what the facts were. Opinions were firmly rooted in the attitude that we are experiencing “way more bad shit than before,” and solving the problem ranged from ensuring we be “closer to God,” to “the Mayans were right.” Probably the most useful of all however was, “I think we need to order some more drinks.”

Below I present to you some data, and then we’ll revisit the question again.

World Earthquakes, 1970-2010

year number of earthquakes in magnitude range estimated deaths
8.0 to 9.9 7.0 to 7.9 6.0 to 6.9 5.0 to 5.9 5.0 to 9.9
1970 0 20 110 1,195 1,325 68,202
1971 1 19 112 1,331 1,463 1,279
1972 0 15 110 1,316 1,441 11,179
1973 0 13 95 1,331 1,439 659
1974 0 14 99 1,312 1,425 5,440
1975 1 14 107 1,447 1,569 12,372
1976 2 15 114 1,649 1,780 697,309
1977 2 11 89 1,686 1,788 2,849
1978 0 16 93 1,526 1,635 15,192
1979 0 13 100 1,366 1,479 1,475
1980 1 13 105 1,299 1,418 8,620
1981 0 13 90 1,168 1,271 5,223
1982 0 10 85 1,425 1,520 3,328
1983 0 14 126 1,673 1,813 2,372
1984 0 8 91 1,579 1,678 174
1985 1 13 110 1,674 1,798 9,846
1986 1 5 89 1,665 1,760 1,068
1987 0 11 112 1,437 1,560 1,080
1988 0 8 93 1,485 1,586 26,552
1989 1 6 79 1,444 1,530 617
1990 0 18 109 1,617 1,744 52,056
1991 0 16 96 1,457 1,569 3,210
1992 0 13 166 1,498 1,677 3,920
1993 0 12 137 1,426 1,575 10,096
1994 2 11 146 1,542 1,701 1,634
1995 2 18 183 1,318 1,521 7,980
1996 1 14 149 1,222 1,386 589
1997 0 16 120 1,113 1,249 3,069
1998 1 11 117 979 1,108 9,430
1999 0 18 116 1,104 1,238 22,662
2000 1 14 146 1,344 1,505 231
2001 1 15 121 1,224 1,361 21,357
2002 0 13 127 1,201 1,341 1,685
2003 1 14 140 1,203 1,358 33,819
2004 2 14 141 1,515 1,672 228,802
2005 1 10 140 1,693 1,844 82,364
2006 2 9 142 1,712 1,865 6,605
2007 4 14 178 2,074 2,270 712
2008 0 12 168 1,768 1,948 88,011
2009 1 16 144 1,895 2,056 1,787
2010 1 21 151 1,944 2,117 226,729
2011 1 6 68 584 659 3,400+

Data above found at http://www.johnstonsarchive.net/other/quake1.html

It makes me wonder about the power of marketing and how it influences people’s decisions. It also makes me wonder how much of what we think is due to “convenience.” It may be convenient to believe that nuclear energy is the most dangerous simply so that we can go back to watching American Idol; and, it may be convenient to think that we are all going to be led to the slaughter as Allah, God, Yahweh, Buddha or whoever/whatever takes their revenge on human kind. but, I do have to ask myself the question: Where do I get my ideas and opinions from, and are they based in fact or fiction?


“Sheep have two speeds: grazing and stampede.”

– Lt. Col. Dave Grossman


This Post Has 8 Comments

  1. Purewater

    Geothermal is missing…I wonder if it’s excluded because it’s such a small energy source or because it’s caused zero deaths.

  2. Chris MacIntosh

    It’s clean, renewable and instant. Unlike solar and wind it provides base load power. It also requires very little land and generates close to zero carbon emissions. Can you tell we like it?

    One of the problems with Geothermal energy is that of transportation of energy but these problems left to unfettered capitalists will likely be resolved. That said Geothermal supplies more than 10,000 MW to 24 countries worldwide and actually produces enough electricity to meet the needs of over 60 million people. Over this side of the world where I’m based at present for example we have The Philippines, generating 23% of its electricity from geothermal energy. That’s not insignificant. Of course there are countries which don’t use it at all so worldwide Geothermal is a mere blip on the energy complex radar at present.
    Iceland is of course touted as the success story of the geothermal community. The country is overrun with 300,000 people (crowding must be a real issue) and is now fully powered by renewable forms of energy, with 17% of electricity and 87% of heating needs provided by geothermal energy. They’ve been expanding geothermal power production recently to meet growing industrial and commercial energy demand. Politics there is problematic though.

    In our humble opinions this sector is a forgotten unloved sector with enormous potential. You might want to take a look at Rampower, Magma energy and Nevada Geothermal. If you were to buy all three you would own most of the US geothermal sector in these stocks. The sector is tiny, growing and unloved. More importantly it actually makes sense.

  3. Djamel Hassaine

    I’m not surprised, no one was interested in finding out what the facts were regarding natural disaster activity. How else can you explain how so many people believe fervently in specific religions which are mostly based on their geographical origin: Middle-east probably Muslim, Europe – Christian, etc (I’m grossly stereotyping here, but I hope you get the idea). The spoon-feeding of facts and ‘accepted wisdom’ starts at a young age.

    Learning in this way is mostly beneficial; to quote Isaac Newton: “If I have seen further it is only by standing on the shoulders of giants”. Building upon previous knowledge is part of the scientific model, which may be the biggest contributing factor to the unprecedented social advancement we’ve experienced in the last two centuries. The biggest flaw with this approach though is assuming what you know is correct when it isn’t.

    You really can’t beat verifying the facts for yourself and apply your own critical thinking. Obviously its not possible to question everything you’ve learnt from other sources (books, news, teachers, etc) as you would probably become incapable of making any decisions. When it comes to investing I think it helps if you identify the most crucial facts influencing your investment thesis and concentrate on verifying those only (I realise this is much harder than it sounds).

    For example: is uranium a good investment right now? The price has been knocked down, presumably because a lot of people have concluded nuclear is dangerous and governments will post-pone or shelve plans for new nuclear stations. Based on the figure Chris has presented, it looks like nuclear is actually one of the safer fuels, so uranium must be a good investment right? This investment thesis would also rely on governments acting for the benefit of society rather than pandering to populist votes and seeking re-election; I don’t really need to waste time checking my knowledge that governments tend to focus more on re-election than anything else, so in this case I think the market has got it right, and I personally won’t be investing in uranium.

    1. Chris MacIntosh

      All good points. As mentioned in the Japan post here (http://www.capitalistexploits.com/?p=460) I think its still way to early on the Uranium sector, but drawing up a wishlist and paying careful attention to unloved sectors which actually make economic sense has worked for us in the past.

      1. Djamel Hassaine

        Thanks, you make a lot of sense regarding nuclear being a good long term bet, but I’m inclined not to under estimate the irrationality of uniformed people and governments.

        Geothermal could be interesting…

  4. Simon

    What bothers me about your metrics is that you defined “safer” by virtue of short-term or immediate human deaths. That is a valid metric for coal and all the other energy sources except nuclear.

    The problem with nuclear is that an incident like Chernobyl may cause very few immediate deaths but may cause billions of dollars in long-term damage. I was reading about this recently (sorry I haven’t got the links to hand), that vast tracks of land in Europe are still unfit for agriculture or grazing because of radiation damage. Apparently Wales is very badly damaged (you know how they feel about their sheep.)

    How many leaukemia-related deaths in Japan over the next 50 years will be directly caused by the current crisis? Answer: we cannot possibly know, and hence the data will lost and the risk under-valued.

    We are all capitalists, so let me speak in the language of economics: nuclear power creates vastly higher negative externalities than any other form of power. Nuclear power exists for a few reasons – one of which is that it creates cheap power when you ignore the externalities. I think there’s also a strong connection between the nuclear power industry and nuclear weapons industry. I state this because the choice of uranium for nuclear power is only sensible if you are trying to enrich weapons grade uranium as a side product. This was certainly the motivation in the American, British and former Soviet nuclear power industries. Why the f*** Japan would buy into this amazes me as they are supposedly anti nuclear weapons.

    The cracks in the nuclear pie are starting to crumble. For instance a recent article caught my eye about the Chinese using thorium to fuel zero-risk, zero-waste, nuclear generators. This is old technology – my associates in the US have been pushing for this for 20+ years but were ignored. Now the Chinese will lead the way in dumping uranium based nuclear tech for clean, safe alternatives.

    A link to read: http://www.smh.com.au/environment/energy-smart/the-reactor-that-saves-itself-safe-nuclear-does-exist-and–china-leads-the-way-with-thorium-20110323-1c6eb.html?from=age_ft

    Conclusion: (a) Long-term outlook on uranium is very negative; Long-term outlook on thorium extremely positive (expect 1,000+% growth over 10 years).

    (b) There are lies, damn lies and statistics. The graph Chris presented is extraordinarily misleading for only showing one very inappropriate metric for the dangers of nuclear power. The damage cannot be measured in immediate deaths. Use an economic measure of damage, one that factors in externalities.


  5. Chris MacIntosh

    Thanks Simon.

    Kudos for critical thinking. What you’ll realise is that I never actually said I agreed or disagreed. I wanted to go through the critical logical thinking process and I’m thrilled you’ve done that.

    On that note: The data provided compares apples with apples. Immediate deaths from energy sources. If we are to take into account externalities then we would have to look into externalities for all the other energy sources and this would encompass a different set of parameters and result in a different set of results.

    I read a report by ABT Associates http://www.abtassociates.com/who had researched coal related deaths in the USA. According to their findings these amount to 30,000 deaths a year from fine particle pollution, and I would guess that the rates in China, India, Pakistan etc are in order of magnitude higher. We would have to take into consideration things like acid rain and crop failure. These translate into deaths in the emerging markets of the world. Related to crude oil we would have to take into account oil spills, damaged coral reefs and livelihoods of fisherman. Heck to be thorough we would take into account the deaths from wars fought over each energy source.

    In short any statistic will always have flaws in it. Its only data. It doesn’t have an opinion and as such that is why we can rely on it more often than not.

Leave a Reply