Business Insight Zone

Lately I’ve seen this idea in several places, that governments should intervene to ensure that gasoline (or coal etc.) stays above a certain price — $4.00 per gallon of gasoline, for instance — so that consumers, entrepreneurs, utility companies, auto makers et al. will know that they can never expect a return of lower fuel prices, and therefore ought to turn their efforts to conservation, alternative energy sources, and so on.

Whether the idea should be pursued, I don’t know. Its political feasibility, I certainly doubt. But with it in the back of my mind, I was intrigued to come across the following passage from Anthony Sampson, The Seven Sisters: The Great Oil Companies and the World They Shaped, which was published in 1975:

In February 1975 Dr. Kissinger [who was then Secretary of State] came out with another brand-new policy, formulated by his new energy expert at the State Department, Thomas Enders . . . Kissinger now proposed that there should be an agreed “floor price” below which the industrialized countries would not allow oil to be sold, so that new investments and alternative fuels would be safeguarded. The scheme had powerful logic behind it, but it was very difficult to decide what the floor should be. While a floor of $6 to $7 [per barrel of oil] seemed appropriate to protect coal or domestic oil, a figure of $12 seemed necessary to protect such innovations of [Colorado] oil-shale: so that the floor seemed in danger of meeting the ceiling. . . . In any case there was little chance of agreement from most Europeans, who saw little prospect of developing serious alternatives. The definition of the floor price was never fully worked out, and the idea was virtually shelved by March 1975.

The timeframe of this idea — two months in 1975 — reminds me of what we’ve seen happen lately to the price of gasoline in the United States. Its precipitous drop over the past couple of months has, among other things, spurred sales of pickup trucks.

But what the long-term implications are, it’s impossible to tell. If they’re anything like they were in the 1970s, it could be a long while yet before we see any serious policy initiative in the direction of renewable energy sources. (Then again, President-Elect Obama has at least talked a good show about renewables, though only time will tell how that plays out.)

My guess is that there’s more momentum these days for renewables, and that the price of oil (ergo gasoline) will rise from its current (relative) depths. But with recessionary headlines like the ones we’ve been getting, I wouldn’t bet on it.

My college classmate Michael Webber – now on the engineering faculty at our alma mater — recently published this fascinating article in Scientific American magazine:

Energy versus Water: Solving Both Crises Together
Water is needed to generate energy. Energy is needed to deliver water. Both resources are limiting the other—and both may be running short. Is there a way out?

I’ll give away the ending of the article by telling you that the answer is a qualified Yes — qualified by the need for enlightened governmental policies (hey, anything’s possible, right?) and “innovative technologies that help to boost one resource without draining the other.”

Although I’m interested in many aspects of Michael’s article, for the purposes of this blog I want to highlight the business wisdom embodied in this sentence:

“The inventor who discovered a way to purify water using minimal energy could become the world’s richest person and be forever enshrined.”

Michael mentions several other technologies that seem ripe for continued development by entrepreneurs looking to blend the green sensibility of ecology with the greenbacks of commerce. These include:

• efficient drip irrigation systems for agriculture, which waste much less water than spray irrigation methods;
• better systems for reusing municipal and industrial waste­water;
• computerized and sensor-based systems that monitor and control industrial and residential water use; and
• solar water heating — a simple technology that needs less in the way of R&D and more in the way of savvy marketing.

Here are other excerpts from the piece, with my highlights added.

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“Many people are concerned about the perils of peak oil — running out of cheap oil. A few are voicing concerns about peak water. But almost no one is addressing the tension between the two: water restrictions are hampering solutions for generating more energy, and energy problems, particularly rising prices, are curtailing efforts to supply more clean water.”

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“The strains between the resources manifest themselves in tough choices at the local level — especially in land- and water-locked regions such as the desert Southwest. Is it better for a city to import fresh­water or to import electricity to desalinate brackish water in deep aquifers below? Or is it better yet to move the people to where the water is? With infinite energy, freshwater can be reached, but even if the public coffers were unlimited, policymakers are under pressure to limit carbon emissions. And with climate change possibly altering the cycles of droughts, floods and rainfall, burning more energy to get more water might be doubly dire. The challenges get even tougher because the U.S. has finally conceded that the best way to fix its energy and security problems is to break its dependence on imported oil.”

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“Whether proponents realize it or not, any plan to switch from gasoline to electricity or biofuels is a strategic decision to switch our dependence from foreign oil to domestic water. Although that choice might seem more appealing than reducing energy consumption, we would be wise to first make sure we have the necessary water.”

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“More than anything . . . we need to value water. We must move away from a long-standing expectation that water should be free or cheap. If we think water is important, we should put a realistic price on it. Without that, we send a confusing signal that everyone can be blasé about wasting water.”

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It seems to me that the dilemma that Michael discusses here relates to a broader observation I made a while back, about how “business evolves to incorporate elements that were previously regarded as externalities.”

Over time, our business ventures — whether because of social pressure, technical breakthroughs, or something else — can incorporate multiple benefits that might once have been seen as mutually incompatible. To take a handy example, cars of today are more efficient AND safer AND faster than Henry Ford’s Model T.

What I’m really talking about is Both/And thinking. And Michael’s absolutely right to guess that some entrepreneur is going to perfect a both/and technique that meets our water AND energy needs . . . and that entrepreneur will make a mint.

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Related posts:

• Designing a low-carbon future: building the new yacht.
• The greatest challenge of business: Both/And thinking.
• Bringing externalities inside the system.

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Photo by Frank-Bernard.

This time last year, crude oil cost $81 per barrel and threatened to crack the $85 threshold. As 2008 began, oil temporarily touched the psychological barrier of $100 per barrel; soon, the $100 mark lost any novelty value, and we became accustomed to oil above $125.

Yesterday, the markets lost 6 – 9 % of their value on the heels of Congress’s failure to pass a bailout bill. This ringing non-encouragement to Wall Street — and thereby the U.S. economy — sent the price of crude tumbling by more than $10 per barrel. And even then, oil still stood at more than $96. (It came back up to $100 today as markets rebounded somewhat.)

My point: after a decline in market speculation that took $30 out of the price of a barrel of oil over the summer, and after the Dow Jones Industrial Average’s worst point-loss ever took out another $10, oil was still higher than we could fathom a year ago, and stratospherically higher than it was a couple of years ago.

Now, maybe oil will decline still further — some experts think so. But look at this chart, which is easy to understand even at low resolution:

The jagged line shows the progression of oil prices since 1 January 2000. The red line is $90, and the heavy black line just above it is $100.

Look at aaaaalll that time, in the early years of this decade, when $90 oil would have rocked the world’s markets and upset everything we thought we knew. Imagine all the earlier decades that aren’t even shown on this chart.

Yet this morning, when I checked oil prices like I always do, I found myself saying, “Down in the $90s? That’s low.”

I’m not claiming it’s a breakthrough insight. But sometimes it’s worth it to pause and reflect upon the recent history we’ve seen, and think about what it might imply in the years to come.

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(Barrels picture by XcBiker; chart derived from Energy Information Administration figures.)

Ripped from today’s headlines:

GM Dealers Report ‘Resurgence’ in Pickup, SUV Demand

On the one hand, good for GM. Like the other Detroit automakers, they’ve been sitting on piles of unsold trucks and SUVs, and this helps them clear that inventory. (Then again, they’ve been doing it with all kinds of fire-sale tactics, including huge cashback and discount promotions.)

On the other hand, the consumer choices behind this resurgence may be ill-informed:

“We’ll see some stabilizing in pickup and SUV sales now that gasoline prices are off their high mark,” Erich Merkle, a Grand Rapids, Michigan-based analyst for consulting firm Crowe Chizek & Co., said in an interview. “Part of the problem for buyers was they didn’t know when gas prices would stop rising.”

Merkle’s comment is fine — and, I’m sure, accurate — insofar as it goes. But to give us a better look at the future, I would reword it this way:

“We’ll see some temporary stabilizing in pickup and SUV sales now that gasoline prices are temporarily off their high mark. Part of the problem for buyers was they didn’t know when gas prices would temporarily stop rising.”

I say this because plenty of oil-price watchers think that oil prices still have a long way to climb, their recent decline notwithstanding.

It will be a shame if many consumers buy SUVs and pickups now, lulled by temporarily less-horrible pump prices, only to see a gallon of gas go to, say, $5.50 in the next year.

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Related posts:

• Should oil get more expensive?
• $134.13
• How inelastic is gasoline?

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(Photo by Mykl Roventine.)

The price of oil is down — a little bit. It’s about $125 per barrel as I write this, which seems much better than the $140+ prices it was fetching a couple of weeks back, but only in comparison to those prices.

If you’re in the oil business, these prices are very good news: Exxon Mobil just announced profits of $11.7 billion for the past quarter. And if you’re in a fuel-intensive business like airlines or trucking, these prices offer little but pain.

But what about the rest of us, caught somewhere in-between? How can we benefit from this historic shift in petroleum prices? Here are just a few quick suggestions of my own:

• If you’ve been looking for an excuse to sell flex-time or teleworking to the top brass in your company, there’s never been a better time. Besides the general benefits that accrue to happy telecommuters, there’s the added morale boost that you’re saving these workers on gas money.
• You can promote camaraderie and teamwork by helping organize — or simply encouraging — carpooling. This could be as simple as putting up a cork board in the breakroom and then sending out one all-hands e-mail.
• You could lobby your local transit authority to locate a bus kiosk or the like near your facility, thereby permanently increasing the appeal of your location to bus commuters.
• If your business has anything to do with energy efficiency, even indirectly, you’ve never had a better market backdrop for putting forward your value proposition.
• Ditto if your business offers anything that helps people to virtualize work that has typically been done physically. This could be anything from online training software to teleconferencing equipment to efficient delivery services that save customers the trouble of driving themselves.
• If you’re in operations and have longed to make real improvements in overall efficiency, you’ve never had a better moment to sell your top brass on the virtues of investing in equipment or processes that will save energy in the long run.
• . . .

What would you add to this list?

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(Image by creativebob4u.)

Perusing the virtual newsstand.

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Dan Markovitz of TimeBack Management makes some excellent points in this post:

How do you change lousy work habits?

I’ve pointed before to the article “Infomania,” which lays out in detail the real, honest-to-goodness, cash-money business costs of e-mail overload and constant interruptions. The intellectual framework is there: we know that bad habits around e-mail and meetings and interruptions cost money. Yet still we don’t change.

As Dan rightly points out, we have to get beyond the logical or intellectual reasons why this is true, and start changing the societal habits — the psychological frames — that we put around these habits.

Think of all the unhealthy social practices — whether something as historically serious as blatant racism or as incidental as spitting in public places — that we now regard as uncouth, unsociable, uncivilized. Organizations that want to improve their performance need to build up some of the same stigmas around unhealthy information practices.

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Social-media P.R. pioneer Brian Solis offers an interesting conversation-starter with this piece:

The Social Revolution is Our Industrial Revolution

There are terms here I would alter (”peoplenomics”? yecch), but I like Brian’s emphasis that not everything is changing, and his observation that much of the overheated talk about “social media” is coming from folks inside the social-media echo chamber; for most folks, social media is just “media” that’s taking on new forms and enabling new, more highly distributed, means of conversation. If you’re interested in what Brian says here, you might also like my earlier take in a related vein, “Western Union and record labels.”

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Joe Romm at the Climate Progress blog stumps for the power of energy efficiency:

Energy efficiency, Part 2: The limitless resource

People who have little experience with what serious energy efficiency investments can do for a company or a state [...] think it is a one-shot resource wherein you pick the low hanging fruit. In fact, fruit grow back. The efficiency resource never gets exhausted because technology keeps improving and knowledge spreads to more and more people.

Particularly compelling is Joe’s assessment of the energy-efficiency actions of Dow Chemical in the 1980s under manager Ken Nelson. You might think that a big, smart, capital-intensive company like Dow would be all over energy efficiency from the get-go, but it’s just not so. My own take on this is that energy was so cheap for so long — and our cultural practices around energy use were so entrenched — that even many big companies didn’t find it worthwhile to pursue efficiency.

The comments thread of Joe’s post is also worth reading. I left a couple of comments there, comparing energy efficiency to Moore’s Law rather than a fruit tree. Here were my last words on the subject there:

My summary: as we get better and better [at energy efficiency], I predict, we will see more and more that we can be doing. Yes, there will be diminishing returns at some point — but we’re so very far from hitting that point that it need not concern us for at least several decades.

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After a long, ridiculous delay, the FCC has finally approved the merger between Sirius and XM Radio. As we’ve discussed before, the National Association of Broadcasters and others have portrayed the deal as creating a monopoly. But, as the Washington Post’s article on the approval notes,

“The merger’s completion is a relief to shareholders who have expressed frustration with the prolonged approval process. XM and Sirius have struggled financially and have said that joining forces is the only way that they can survive. Music-enabled cellphones, iPods, music Web sites and traditional radio stations all provide increased competition.”

In almost every case, I’m against monopolies. But this isn’t a monopoly. If Popeyes, Church’s, and KFC joined forces into one mega-chain for fried chicken, they wouldn’t have a monopoly on fast food; they’d still be competing with McDonald’s, Pizza Hut, Dairy Queen, and every other fast-food chain in the world.* That’s what’s happening in the Sirius-XM deal.

( * Sure, sure — in real life, YUM! Brands owns both KFC and Pizza Hut. But please humor me while I spin out this hypothetical.)

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(Picture by ernop.)

Wrapping up this little series of miscellaneous items, I offer you some uncategorized favorites.

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From the Presentation Zen blog: Ira Glass: Tips on Storytelling

I like, but don’t love, This American Life. But I have a ton of respect for Glass, who has taken a smart geek’s passion for storytelling and built a major following with it. Here’s my favorite bit from this piece:

“Not enough gets said about the importance of abandoning crap.”

That lesson needs to be hammered home not just to every storyteller, but to every corporate manager and line worker in the world. When you detect that something’s not worthwhile, just let it go.

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Here’s a crazy thought: listen to your customers when they tell you that you’re making them angry.

Give credit to Netflix. As John Murrell explains in this Good Morning Silicon Valley item, the company retracted the plan it had announced to eliminate its “Profiles” feature.

Profiles is the feature that allows you to have more than one Netflix queue at a time. So, if you have a three-DVDs-at-a-time account, you can allot one of of them to Dora the Explorer, Transformers cartoons, and other kiddie fare, while the grown-ups get to enjoy Syriana, Blazing Saddles, and season upon season of The Sopranos.

I would have assumed that the feature was broadly popular, since it could also ensure that one roommate / spouse / sibling could watch a string of romantic comedies while the other indulged a taste for horror flicks. This assumption was grounded, in no small part, upon my own household, where the kid / grown-up dichotomy is in full force.

As it happens, though, Profiles has been used only by a small minority of Netflix customers. Yet it’s a vocal minority — vocal enough to get the company to change its mind about removing the service. Like the Netflix customers Murrell quotes, my wife was relieved to find out that she could continue to keep Garfield and the like separate from Weeds.

We hear enough about bad customer service that it’s worth celebrating when a company does it right.

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David Armano: Whispers

This is a reflective, personal post well out of the norm for David, who typically blogs on branding, advertising, and similar topics.

Life’s whispers are often soft and subtle. They come without warning. The whispers are always there—but we’re not always listening. The noise we surround ourselves with often keeps the whispers at bay. We become incapable of hearing them, until we choose to. At this point we see through fresh eyes.

Part of my goal every time I write on this blog is to help you see the business world — whether that means a whole industry or your own e-mail inbox — with fresh eyes.

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From TIME.com: 10 Things You Can Like About $4 Gas

It’s not all bad news: the high price of gasoline means less air pollution, slimmer waistlines, and less traffic (plus fewer traffic fatalities). I particularly liked this reminder of how these changes grow out of the American devotion to free markets:

“You suddenly are reminded how the economy works,” says Eric Roston, author of a new book about energy, The Carbon Age. “Nobody wants high prices for oil. But there’s also no faster mechanism to change behavior.”

Our love for the price mechanism may even outweigh our torrid, decades-long affair with the automobile. In any event, high-priced gas could bring many beneficial changes along with the pain now experienced by many commuters and businesses.

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(Photo by tsuacctnt.)

There’s no special reason that a baseball game seems like the perfect thing for the Fourth of July . . . unless you’re one of the many millions of Americans (like me) for whom it is the perfect thing.

There nothing wrong with it, mind you, but it’s not logic — it’s culture.

Culture grows out of all sorts of things: religion, wars, landscape, historical trends, etc. But plenty of it is basically accidental. If things had been just a little different, for example, Americans might regard the Fourth of July as a perfect day for football or soccer or horse racing.

(For that matter, the Fourth of July was very nearly the Second of July, since that’s the day the delegates agreed on the Declaration of Independence. But they didn’t start signing it until two days later.)

The historical accident of cheap energy

Oil, just by coincidence, occurs naturally in abundant qualities in places like Pennsylvania, California, and Texas. It’s also a wonder-chemical when it comes to packing BTUs into a small amount of mass. Plus it’s easy to burn — in an oil lamp, a piston engine, or whatever.

If oil hadn’t occurred in abundance in the United States, or if it hadn’t been discovered until much later, or if it weren’t so easy to burn, Americans might have very different views about a lot of things: automobiles, the proper price of fuel, the Middle East, and so on.

Note that I don’t say which way would be better. Ultimately, it’s unknowable. I’m just observing that things surely would be different.

Japanese industrial cooperation

My friend James Governor, who’s a technology analyst with a focus on environmental issues, raises this issue with his latest blog post:

Collaboration On A Grand Scale: Japan and Carbon Capture

. . . Japan has a history of successfully retooling its economy to deal with economic challenges and scarcity . . . It’s a country with a particularly strong sense of duty and continuity.

Keep in mind that, in different settings, “collaboration” involving 24 power companies could be interpreted as “collusion” or “oligarchy” or something else. Keep in mind, also, that these interpretations would be culturally driven — because legal and commercial norms are parts of culture.

Getting back to oil for a minute, it might be worth noting here that the “Seven Sisters” of the 20th-century oil business were notorious for being brass-knuckle competitors, yet were also watched constantly for signs that they might be colluding to the detriment of consumers (or, later, oil-producing countries). So when, say, Exxon and Chevron pooled their resources into Aramco in 1948, they were careful to do it in a way that wouldn’t be construed as forming a trust by U.S. regulators.

Hospital patient charts

With a typically acid tongue, The Last Psychiatrist lays out

Six Quick Changes That Will Lead To Better or More Cost Effective Hospital Care

Since I’ve never been a doctor or a nurse, I can’t speak to the accuracy of the post’s suggestions. But the important thing to note is that TLP is suggesting changes that could be put into effect at any time by a change in rules, not a change in technology.

Rules are a piece of culture.

American hospitals have their own culture just like the international oil business or the Japanese energy business. TLP’s suggestions involve nothing more complex, in terms of logic, than using a pen and following some new guidelines. But TLP seems well aware that the suggestions would be resisted, in some cases tooth and nail, by doctors.

How to solve a big problem

Businesses are facing enormous challenges. Not just the forever-and-ever challenges of finding good workers, finding good customers, managing finances, and so on, but changes in the landscapes of whole industries. And many businesses — many whole industries — are figuring out that they must make huge changes of their own. But how to do it?

Unfolding the whole answer has already filled libraries. But one of the starting points to the answer is this:

Understand that you’re not just changing the reasons or the logic or the mechanics, but the CULTURE.

It’s the same for organizations as it is for individual people. Most folks don’t change their actions unless they change their whole way of looking at things. It’s true of heart patients trying to live longer. It’s true of people who want to fix what’s broken in their lives. And it’s true of organizations that want to embrace change.

Culture as a technical problem

We like to focus on technical challenges. If we can clarify specs, enumerate steps, compose a Gantt chart, we can often break down a big thing so that it seems manageable.

Culture? People issues? Not so much. Too sticky — and it’s hard to get people to change.

But in fact, steering the culture in a better direction is part of the technical challenge itself, because you can’t implement the world’s best technical solution if you don’t do it in a way that’s culturally doable.

The moral of this story: You can be as logical as you like, but until you get the culture right, you’re rowing against the tide.

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(Photo by jimcchou.)

A while back I introduced a simple metaphor I use to think about changes in the business world:

• Landscape and weather in the business world.

The idea is simple: some things, like Generally Accepted Accounting Principles, form the durable “landscape” of business, while others, like market fluctuations, should be regarded as temporary “weather.” Just like in real life, if you get caught in a hurricane, it could ruin you. But so long as you avoid the worst of the weather and abide by the realities of the landscape — don’t walk off a cliff, don’t try to build a skyscraper over the deep ocean — you’ve got a good chance to prosper.

These days, it seems to me that I see ever more news suggesting a wave of changes to the business landscape. The obvious ones — energy prices, the massive repricing of U.S. real estate — we’ve discussed before. But here are two more from today’s reading.

The average TV viewer is now out of the demo.

From Variety (via Darren Barefoot) — “TV viewers’ average age hits 50“:

According to a study released by Magna Global’s Steve Sternberg, the five broadcast nets’ average live median age (in other words, not including delayed DVR viewing) was 50 last season. That’s the oldest ever since Sternberg started analyzing median age more than a decade ago — and the first time the nets’ median age was outside of the vaunted 18-49 demo.

One of my favorite adages in business is this: “If something can’t go on indefinitely, it won’t.” Sure, it seems obvious . . . except that people act contrary to this obvious truth all the time. As Darren rightly says in his post, “The writing seems to be on the wall for live television. As producers and advertisers react to this, expect some creative and hyper-irritating new advertising strategies.”

The only thing I might take issue with is “creative,” since I’ve been underwhelmed with the creativity coming out of the major networks in recent years. I might say “desperate” instead.

Microsoft no longer dictates your OS from on high.

From the NYT’s “Bits” blog (via James Fallows) — “Et Tu, Intel? Chip Giant Won’t Embrace Microsoft’s Windows Vista“:

Intel, the giant chip maker and longtime partner of Microsoft, has decided against upgrading the computers of its own 80,000 employees to Microsoft’s Vista operating system, a person with direct knowledge of the company’s plans said.

The person, who has been briefed on the situation but requested anonymity because of the sensitivity of Intel’s relationship with Microsoft, said the company made its decision after a lengthy analysis by its internal technology staff of the costs and potential benefits of moving to Windows Vista, which has drawn fire from many customers as a buggy, bloated program that requires costly hardware upgrades to run smoothly.

Time was, Microsoft was the landscape of the desktop PC world, and it more or less dictated the weather as ewll. Any predictions of a steep decline in that realm would be premature, but it’s worth noting that previous versions of the Windows operating system, especially the NT and XP editions, rolled out and penetrated the market despite users’ objections.

Microsoft has long been in a position to say “Welcome to your new OS” whenever it rolled out a new version of Windows. But the wide backlash against Vista — which has been building for quite a while now — may indicate a change in that.

What other changes to the business landscape do you see?

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Related:

• Landscape and weather in the business world.
• Economic forecasting: How’s the weather for YOU?

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(Photo by jmagnusphoto.)

No one’s saying you need to go into the rickshaw business.
Then again, maybe you should.

Because I think it’s maybe the most important single thing affecting the business world today, I’ve written repeatedly and at length about the high price of oil. But after all the talk of the pain that oil prices have brought to car makers, airlines, shippers, and the like, let’s turn the equation on its head:

How could you BENEFIT from the high price of oil?

Somewhere, somehow, enterprising entrepreneurs and business managers are making hay off of current conditions — and I’m not just talking about VP’s at Exxon or wildcatters in West Texas.

Consider the ways that high fuel and energy prices could benefit your organization:

• Maybe $4.00 gasoline leads your company to institute saner telecommuting practices, which leads to lower operating costs, better morale, and higher productivity.
• If you work for Company X, maybe you help devise a lower-energy way to carry out an industry-standard function . . . so that soon the new industry standard is “the Company X way.” Just think of the reputation that would win for your company and for you personally.
• What if, in the name of fiscal necessity, you came up with green breakthroughs never before seen in your line of work. The publicity around these breakthroughs could win untold good P.R. and customer goodwill for your organization.

These are just some ideas off the top of my head — and I know my audience is a lot smarter than I am. So, you tell me, if high energy prices are the lemons, how shall we make lemonade?

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(Photo by timparkinson.)