Jim Rogers on Alaska

Just re-read Jim Rogers’s excellent, capitalist version of Che Guevara’s Motorcycle Diaires.  From 1990 through 1992, Jim and his then-girlfriend, Tabitha, took two BMWs and rode 65,000 miles around the world on them, eventually chronicling the journey in the best-selling Investment Biker. The final chapter, an afterword, provides some of Jim’s insights of the final destination of their odyssey, Alaska.

Now, Jim Rogers is an extremely astute observer of the world.  He made his mark on Wall Street in the form of one of the two founding principals of what would become the most storied global investment vehicle of the last century, the Quantum Fund. It did not take very long before the rest of the investment world learned to take at their peril the opposite side of a trade made by this soft-spoken good old boy from Demopolis, Alabama.

Of all the investment decisions Jim made, however, the one which make the most mark on me was his decision, at age 48, that he had made enough millions… and he walked away.  Away to his motorcycles and his traveling and his writing and his enjoying life.

When we got there, Investment Biker concludes, we realized how different people in the Yukon and Alaska are from those in Ottawa and Washington, D.C.  As in so many places we passed through around the world, these people aren’t the joiners and backslappers of the capitals, they are the loners and mavericks, a hardier breed produced by the rugged breed of their habitat… How can Alaskans allow Washington to run their lives? What do the moles of the Beltway know of their lovely, stark country? … In fact, Alaskans have more in common with their neighbors in the Yukon and in Siberia than they have with bureaucrats in Washington, Ottawa or Moscow.  If the three of them, fabulously rich in mineral resources, aligned themselves into an independent frontier nation, they could attract enormous development capital.

From the vantage point of seventeen years on, it is obvious Jim got it partly right, partly wrong.  He failed to reckon with the power of Alaska’s three congressmen, a power which increased substantially over the subsequent dozen years, to bind the state ever more tightly to funding from the nation’s capital. His supposition that Alaska need tie itself to Yukon and Siberia in order to attract development capital, even if not wholly serious, also missed the mark.

But he was correct in observing that Alaska does need development capital.  Even in 2009, the state, and so many of its inhabitants, cling to the wonderfully naive thought that natural resource extraction, by itself, can create wealth and prosperity for its people.  This has been the chimera of so many resource-rich lands throughout the world, throughout the centuries.  The value-added of resource extraction never has, and never will, flow to the primary producer, and the multiplier effect of such production in the lands affected is small – perhaps three or four times (the normal multiplier effect for an industrial activity is around seven times).

Alaska can overcome the challenges its geography places on it only when development capital does permit it to extract benefit from its natural resources, rather than sending them afar so that the benefits accrue to others.  This is a lesson China has learned, Brazil has learned and, increasingly, the smaller Gulf States have learned.  The newest large-scale natural resource story in Alaska involves the natural gas deposits associated with North Slope oil production.  A modest-scale petrochemical industry based in Alaska using this as feedstock would have far more beneficial impact to Alaska’s socioeconomic well-being than a pipeline Out ever could. Why? The value-added of polyethylene, of polystyrene, and of other simple gas-based polymers not only is far vaster than that of natural gas, but the associated jobs would exist in Alaska, not elsewhere. The challenges of transporting gas – by transcontinental pipe or by sea-borne LNG tankers – would be substituted by the ease of transport solid polymers provide. The vagaries of the world marketplace for a raw material would cease to exist.

If Alaska is to prosper in the coming decades, it will not be through the continued largesse of Washington, but because it has taken the path of responsible development – OF its resources, BY its people. The development capital can come from without – Jim Rogers, are you listening – but the state must show itself to be receptive of same.


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