Sep 18, 2020 | Change, Governance
Gas, it seems is the way forward, according to the Prime Minister.
It seems to me that the conflicted debate about the evolution of our energy sources between fossil fuels and renewables, who wins and who loses, is more about the deployment of capital, and the beneficiaries of that deployment, than anything else. Platitudes about consumer energy prices, offering manufacturing the opportunity to have power at competitive rates is all very fine, and correct, just a few decades slow in coming.
For the whole of the 20th century, the geopolitical landscape around the world was driven by fossil fuels, and perhaps to a lesser extent other extractive industries.
The enterprises, public and private, made their owners and leaders rich by extracting profits, most often rewarding themselves for the largess provided by geography and to a lesser extent, politics and luck. They were, and continue to be an extraordinarily powerful force, often below eye level of the general public. Communities and the individuals in them have benefited from these industries, but not nearly as much as those that control them.
Now, the economic worm has turned, and renewables are becoming rapidly more economically viable, the extractive fossil fuel industries are being squeezed. As the battle for market share has intensified, we see the price of oil has dropped dramatically, and productive assets and their supply chains are being increasingly stranded.
The current oil price is around $40/barrel and under significant downward pressure, while at the same time, extraction is increasingly capital intensive, as the ‘easy oil’ is running out. This combination of downward price pressure, increasing competition from other energy sources, and increasing capital intensity is a harbinger of a wave of bankruptcy as the higher cost wells are closed as uneconomic. I am old enough to recall the very real concern about ‘Peak Oil’ back in the seventies, when the world was supposed to be running out of the stuff. Now the price in dollars is almost the same as it was 30 years ago.
Ref https://tradingeconomics.com/commodity/crude-oil
Listen to the discussion of the modest resurgence of US manufacturing, the low price of fuels comes up, particularly natural gas as the driver. Gas is now at about 2.40/MMBtu, the same price it was back in the early nineties, a sixth of the price 15 years ago, having undergone a roller coaster ride.
This would appear to me to be commercially unsustainable. Gas is (as I understand it) even more capital intensive than oil, as gas wells generally do not have a long life before the resource is exhausted, and therefore need a return in a very short time frame to justify the investment risk.
This is before the environmental risk is considered. I have absolutely no expertise in this area, but have heard a very knowledgeable source describing the fracking process as: ‘being like locking the exit doors in a multi story building , and yelling fire, then watching where the leaks occur as the pressure builds’. In areas of sensitive geology, this is unlikely to have any positive impacts at all, particularly after the gas has been released, and the gas company moved elsewhere to repeat the exercise.
(Gas is measured in BTU’s, or British Thermal Units, which is the quantity of heat content in a fuel. 1 BTU is the quantity of heat required to heat a pound of water by 1 degree Fahrenheit when the water temperature is at 39 degrees Fahrenheit. A MMBtu is 1 million BTU’s)
Then there is coal, a similar roller coaster, and currently below the prices of 20 years ago. There are many grades of coal, some less price sensitive than others, but they all share similar characteristics as being dirty, and now cheap, under the cost of production of all but the most productive mines.
Then you have the cost of renewables, dropping by huge amounts over the last decade, photovoltaic by over 80%, less for wind .
(CSP is concentrated solar power) Graph https://www.irena.org/newsroom/articles/2020/Jun/How-Falling-Costs-Make-Renewables-a-Cost-effective-InvestmEnt
Of course the numbers depend a bit on who you use as a source, and what sort of granularity on the data you are seeking, but the trends are unmistakeable.
At some point, fossil fuels will become completely uneconomic, and we are probably not far from that point. When that happens, investment will cease, the ownership of these entities will pack up, having extracted all the returns that can, and move on. What will be left is the massive clean-up bill.
Who will be paying the clean-up bill?
We will, taxpayers, the public, from whom the fossil fuels industries have already extracted super profits from the jointly ‘owned’ resources.
I am not a green lefty by any means, but am concerned at the legacy being left to my children and more specifically my grandchildren. It is them that will carry the greatest burden of the clean-up.
There are many people with the chops necessary to speak on these topics from a point of expertise, I am little more than a concerned observer. However, the science is unequivocal, and there are paths to improvement.
Barry Jones when Minister for science in the Hawke government keynoted with Al Gore in a 1984 an ‘Ozone layer’ summit in London, sponsored by the darling of conservatives, Maggie Thatcher. This led to the Montreal Protocol, an international agreement to ban the manufacture and distribution of CFC’s. They were replaced by HCFC’s, which did less damage, and have been subsequently replaced again by chemicals with even less impact. Perhaps I am being cynical, but I see the profits of chemical companies driving this change, rather than the need to act for the general long term good. Nevertheless, the science has been undisputed by experts for almost 40 years.
It seems that so far, there are insufficient numbers in the halls of political power listening to scientists, unless it suits them to do so, as in the current Corona crisis.
I cannot believe it is because they are stupid, or blind, rather that they comply with that wry observation made in varying forms by several including Upton Sinclair: ‘It is useless to argue with a man whose opinion is based upon a personal or pecuniary interest’
Somehow, we need to poke a lighted stick up the arses of those who continue to push for the retention of fossil fuels as a core of our energy mix and export income. In the absence of any action to make change, we will be in even deeper trouble than I think we are.
Sep 16, 2020 | Governance, Innovation, Strategy
A short while ago I felt very sad, and uplifted at the same time.
Weird.
I was watching my 4 year old granddaughter play , keeping herself company in her own fantasy world, jumping from one thing to another without any hesitation, no sense of self consciousness, but following a ‘logic’ only she could see, hear and feel.
Creativity being expressed in a totally natural way.
I am pretty sure most people have seen this, at some point, and felt uplifted. Then I realised, that in a few months, she would be going to school, and that joy of random thought, learning by experience, feeling absolutely free from judgement was about to hit the wall.
School works with a set of disciplines. Numbers, regulated behaviour, nominated time slots for scheduled activities the kids did not choose. It teaches organisation, discipline, and a ‘top down’ awareness to these rapidly developing brains consistent with what ‘conventional wisdom’ has decreed as appropriate for the future life kids will lead.
Who knows anything about the future life of my granddaughter?
Watching her, I also recalled that I had seen the previous week the announcement of the death of Sir Ken Robinson. That made me sad again, all over,
For those few on the planet who do not know who Sir Ken was, just google ‘the most watched TED talk’ for a dose of his verbal and philosophical magic.
Asking how schools kill creativity in kids, and how to fix it, was his life’s crusade. His TED talk at the time of writing has 69 million views, several of which have been mine, and a much larger number have been those I have persuaded, cajoled and pushed to watch.
Here, in front of me was the living reason he took on the world of education academia.
It also occurred to me in those minutes of reflection, that over time, my granddaughter may be pushed into doing the things she was good at, in preference to the things those she liked to do.
That is how the world now works.
Most people have things they are good at, but do not particularly like doing. I certainly have. To meet the outside markers of success, most go with those things, and use their free time for the things they really like doing. In those times, hours seem to pass like minutes; somehow, you have entered what some would call ‘a flow state’ where time seems compressed, and the output, is just for its own sake.
Joyous.
Wouldn’t it be fantastic if the things we like become the things we spend our days doing to earn a living?
Imagine living your life in a state of ‘Flow’
My granddaughter was in a state of flow playing, and it seems like my duty to extend that as far as possible.
A lucky few get to feel it for themselves every day, and as a result, have a chance of both being as happy as they can be, and changing the world.
Sep 14, 2020 | Change, Governance, Management
‘5 why’ is a tool often used to understand the real cause of a problem. Finding those real causes is often like peeling an onion: one apparent problem or more often symptom of a problem, leads to another, to another, until the root cause is clear.
Often however, we make changes in the absence of a compelling problem, usually to take advantage of an opportunity, or simplify/optimise some sort of process. In those cases, I have often seen the onion reverse itself.
You end up with unintended consequences.
A pack change that confuses existing customers, a change of supplier for a better price that has consequences for operational efficiency; a product feature added that customers said they wanted that added to unanticipated production complexity, and so on. I have suffered from several of these unintended consequences of seemingly sensible, well considered and pro-active changes.
Before any change, exercise a ‘Reverse 5 why’. Look for the wider consequences that may be caused by the change, and take the impacts into consideration.
Move a few steps back, and ask yourself; are there any impacts from this change? How will other functional responsibilities, customers, supply chain partners, be affected? What unintended consequences may occur?
It is very easy to become close to a project, and proceed to implementation without taking a ‘helicopter’ view of the potential impact beyond the immediate context of the change. Once you start doing it, taking that extra moment, which is usually all it takes, it becomes an integral part of an automatic due diligence process undertaken before making a change.
Building an automatic ‘Reverse 5 why’ into your planning processes will identify risk, and build the confidence of others with a veto in the projections you will have done to support the change.
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Sep 10, 2020 | Customers, Small business
Regularly, I find myself in a discussion with those who sell their time and expertise rather than a physical product, talking about price.
How do you set it?
After 25 years of doing it for myself, you might think I have some tips?
Well, I have plenty of experience and some scars, but it remains a really tough question. It is especially tough when there is not much work around.
There are only two driving considerations:
- How long the project will take me.
- What is the value of the project to you.
These two factors combined with my standard rate will define a quote.
Generally my quotes are fixed, if I make an error in scoping in my favour, OK, if the error is in your favour, good luck to you.
I will not haggle, either the knowledge and experience I have is of value to you, or it is not.
However, there are a few mitigating factors that can influence the price.
- Project scope. I am an expert in specific areas, not all. Often there is the opportunity for you to use others who may generate a better outcome more quickly. In that case, I will recommend a couple of people to you, people that I would trust were I in your shoes. In that case I will not clip the ticket in any way, unless you need me to project manage the ‘subbie’. This may reduce my price, as it no longer consumes my time.
- Timing. As I work on projects, there are times when I am up to the gills, and others when there is plenty left over. If your project is flexible in its timing, and I can get to it in those slower times, perhaps we can agree on some price flexibility as well. However, that is unusual, as what seems to be a ‘dry patch’ has the habit of suddenly turning into a downpour.
- For some reason, the project we are discussing is more than just interesting to me, as those are the only ones I take, but compelling, addictive in its potential to make a difference. Again, rare.
I am a stand alone freelancer, an expert in a narrow but very deep field, trading my time, experience and knowledge for money. I know a lot about a wide range of other things, but do not claim expertise of any great depth. Generally, I do not do projects that require those skills, except as a catalyst and enabler of the areas of deep expertise.
The focus should be on the value that will be delivered, not the price.
Maybe that helps you to think about your own pricing strategy.
Sep 7, 2020 | Analytics, Management, Marketing
As a marketer, I want data to better understand the risks and impact of investments in marketing. I am a true believer in data, which also means that the limitations of data are factored into my thinking.
The nonsense pushed around for decades that by default, human beings respond to stimuli in a binary way is increasingly being recognised for the bunkum it is. Marketing effectiveness is not as easily subject to risk analysis and probability based reasoning as most, including myself, would like to be the case.
Data that represents what has happened in the past might be objectively true, but as we see every day, can easily be interpreted and presented differently to deliver the message the carrier wants to be heard.
If we can do it with real data collected from past activities, imagine the vagaries that can be built into the data that is supposed to be telling us what will happen!
The selling point of all the digital data around is that it is both accurate and actionable. Tactically this is partly true, strategically it ranks with the fortune teller in the local fete as a base from which to make long term choices.
The two fundamental drivers of calculating an objective assessment of the impact of a marketing investment are:
Attribution.
Attribution is a particularly difficult and often overlooked problem. Is that purchase because of the anonymous display ads on Google, the annoying branded email that follows you around for weeks after a casual search, the fact that the truck that went past your door delivering was clean, the TV advertising, or that the packaging looked good on a supermarket shelf? All these factors play a role in creating a successful marketing investment, but how do you sort out the relative weights of the impact with one dimensional data?
The unpredictability of human behaviour.
Then you have the fact that people simply do not act rationally, or always in their own best interests, the two foundations of econometrics. They act on a range of impulses and learned behaviours that have little to do with rational economics, and everything to do with psychology. We are only just beginning to understand the impact of psychology on an individuals decision making.
Between them, these two factors make assessment of marketing effectiveness an elusive target. It is best served with the combination of data, and intelligent hindsight, mixed with a high degree of qualitative sensitivity to the drivers in the market, and instinct. These characteristics are only gathered with deep experience, years down in the marketing weeds, learning by doing. It does not come from a textbook, online course, or a few years following instructions.
