I hate to destroy the illusion that I spent this entire summer at the Galapagos (although I would have loved to…). I also have to fess up that Steven Addis and my wife took the pictures I used for my little Galapagos blog entry, so they deserve all the credit!
In any case, I got some homework today to revive the blog by sharing some of the stuff I have done over the last few months, without telling you too much about what is really going on in our little “project Better Place”…
I figured that the best sharing I can do is to put up my reading list from this summer, to prove I wasn’t totally goofing off. All books are extremely interesting and every one of them is highly recommended reading on their own. Put together with the weak signals I collected this summer they make for a very interesting picture.
So, On the boat in the Galapagos I read Blue Ocean Strategy by Chan Kim and Renée Mauborgne, which is a fantastic business strategy book, guiding the reader through a methodology for examining markets by looking at them with a fresh view. It could probably be considered a prequel to both Innovators dilemma (by Clayton Christiansen) and Crossing the Chasm (by my dear friend Geoff Moore), two of my favorite business books ever. In other words, the best way to disrupt a market is by looking at an adjacent (even if not yet existing) market and defining the complete product through new glasses. As a general observation, the book is much better read in the middle of a blue ocean, but that is not a mandatory requirement…
I read a couple of great car books, one of which is a rare find – Billy, Alfred and General Motors by William Pelfrey (who was the head of GM’s corporate communication till recently). I bet you most of you don’t know who founded General Motors, but all of you know who Alfred is in the title of the book. And no, the answer to both answers is not the same person. Read the book! I always find that these books about what happened at the beginning of an industry to be extremely inspiring, as we all now take this $1.5 Trillion industry for granted, with its rules, inertia, winners and losers. We buy the cars but don’t know each name stands for a great engineer or an inspiring entrepreneur, who failed or succeeded, but whose name became immortal in the car brand they spawned.
Speaking of formation of industries, I re-read one of my all time favorites - Empires of Light by Jill Jones. If I have not yet convinced you to get that book and read through it’s time you do. What a master piece, describing an industry that changed all of our lives, through so many imperfect technical solutions some of which still stand. To think of the fact that incandescent light-bulbs are still dominant more than a century after Edison, and are still wasting 995 of the energy they get in the form of heat…yet they carry so much inertia that they are still ubiquitous even in countries where electricity and emissions are problems. Not to mention, Edison’s fight against Alternating Current (AC) which no one even thinks of replacing as the standard today… Yet we all seem to think that Tesla was a sports-car guy now that Tesla Motors generated the much-deserved excitement with their roadster.
The other car book is the new one, Zoom by the two economist columnists - Vaitheeswaran and Carson. I love the historic perspective, the conclusion that the car market is about to be disrupted, although I don’t agree with the openning remarks about how Hydrogen is the solution (although I am not through the entire book yet, so there might be a great twist to the story towards the end). The book is extremely thoroughly researched, very colorful in its detail of the car industry, and feels almost like it takes over where Billy, Alfred book concluded… so consider it an unsynchronized sequel…
Finally, a great book you should read to put the entire oil picture in perspective is Out of Gas written by David Goodstein of CalTech. The first chapter is fantastic even for people who are not versed in the science part of the issues. The rest if great if you really want to understand the fundamentals of the energy issue and not make the same mistakes as other people make routinely (like thinking that “oil producing countries” actually produce oil…).
I mentioned weak signals – which is something I picked up at the great session with my Young Global Leaders out in Dalian, China. The hospitality was as usual incredible, with China awe-inspiring in its continuous growth and enormity. I have a bunch of notes from the sessions, although the best part about YGL this time were the YGLs themselves and the free form discussions we all had, which I am not at liberty to share even if I could capture the magic of that week in our shared space. The YGL team and Professor Schwab asked us to bring a weak signal to the session – meaning some event or piece of data that tells us something about the future, not in a direct way.
The question caused me to start collecting weak signals this entire summer. The three that I would share with you are all related in fairly obvious ways though – The cost of a deep water exploration oil rig, this year’s Nobel Peace Prize, and the recent story about the reduction in ocean’s ability to absorb CO2.
- A new deep ocean rig costs upwards of $600M to buy and $500,000 to operate daily. It digs at the ocean floor which is 12,000 feet under the ocean surface, and goes in well over 20,000 feet to find oil. I learned about these numbers in a session where an expert on the topic mentioned that oil is “cheap and abundant”, which makes me wonder what happens when we need to find the “expensive oil” - if this is the cheap stuff. Did I mention the price of an oil barrel crossed $90 for a brief moment this week?
- Al Gore won the Nobel for his amazing work waking us up to the dangers of the “uncontrolled experiment” we’ve been running on the only habitable planet within reach. I still find some people’s reaction to the recognition he received incredible. In some newspaper I read the morning after the headline was “Al gore makes 9 mistakes in his movie”. Talk about denial.
- Finally, this last one from this week's news - Oceans seen soaking up less CO2. This one is really troubling as the ocean is our global “hidden CO2 sink”. You see, a few years back scientists ran a calculation that predicted our Earth’s atmosphere should have about twice as many carbon atoms as we measured, so everyone was wondering where did the CO2 go? It ended up that the ocean was a very efficient CO2 sink. It also ends up that the sink is getting clogged…as we find out today that the speed of absorption went down by 50% over the last decade. As if we needed more bad news. Did I mention the caps were melting at an alarming speed?
When I put all these signals together I get an interesting picture – (1) we ran out of cheap new oil reserves, (2) we are running out of place in the atmosphere and the ocean to store the carbon atoms oil makes when we drive our cars, and (3) we are all much more aware today than we were three years ago of the implications of our actions and the predicament we found ourselves in, thanks to Al Gore. At the same time, we will not stop driving our cars – thanks to the freedom to roam we got used to since the days of Billy Durant, Henry Ford and Alfred Sloan.
Now, as I was writing this entry two strong signals flared up - Oil hit $92, and closed the week over $90 - as OPEC anounced they simply don't see a way to increase production short term. the second one was a strong rumor coming out of the blogosphere about China intending to raise the tax on Gasoline so as to get the price up to $5 per gallon. I am not sure there is a base to the rumor, but if it is true then the second largest car market in the world will be strongly inclined to shift away from liquid fossil fuels fairly rapidly.
What does it mean? I guess we’ll see in our collective behavioral changes…From government policy to individual choices. Is it time for a “blue-ocean” look at this greatest of industries...
Stay tuned - more on Monday