Five Ideas That Matter

Der Spiegel is running an English abstract and commentary on a German military preparedness study on Peak Oil. There’s been a little commentary around the web on it too.

It seems to me a sensible and responsible issue to be doing scenario analysis around. This what Der Spiegel says:

The issue is so politically explosive that it’s remarkable when an institution like the Bundeswehr, the German military, uses the term “peak oil” at all. But a military study currently circulating on the German blogosphere goes even further.

The study is a product of the Future Analysis department of the Bundeswehr Transformation Center, a think tank tasked with fixing a direction for the German military. The team of authors, led by Lieutenant Colonel Thomas Will, uses sometimes-dramatic language to depict the consequences of an irreversible depletion of raw materials. It warns of shifts in the global balance of power, of the formation of new relationships based on interdependency, of a decline in importance of the western industrial nations, of the “total collapse of the markets” and of serious political and economic crises.

To which the only sensible answer is: of course. Of course it is politically sensitive and of course it is a major game changer and of course we would prefer to be in denial.

The father of Peak Oil Colin Campbell point out that it doesn’t mean oil is running out fast, just that the economics of oil production, marketing and use changes because there are so few new barrels to discover. One implication is constantly rising prices, a phenomenon we are already witnessing which in turn brings marginal deposits into the market, so in a sense rising prices extend the life of oil as a resource.

We should expect oil at $200 a barrel and over. Not that Der Spiegel says that. Their take is on the political implications for Europe of oil dependence on Russia.

My view is those countries that think adopting electric vehicles at the rate of 10% by 2030 don’t have a solid enough grasp of our innovation needs. We need to be off oil as a major power source for transportation within fifty years. That’s part of the excitement right?

Ever since German IT and general electronics, power and component giant Siemens announced it was setting up its own bank I’ve been pondering changes in banking.

The FT explained that part of the rationale was, with a banking license Siemens could deposit some of its $9 billion cash pile at the German central bank, instead of with a commercial bank. But it also wants to do more with that money.

Like many of my peers I have a tendency to look for the new in the Web. Clearly Siemens’ action is not a web play and nor is it anything to do with the web. Peer-to-peer banking online is on the increase but total lending through P2P sites over the past three years doesn’t add up to 10% what Siemens has in its cash pile. So change is elsewhere.

In fact it seems to reside in leasing where many vendors (IBM, Microsoft, Sun, and of course Siemens) are ramping up their vendor finance programs. That means they are less and less dependent on banks agreeing leasing deals with large companies.

Here is the curiosity – they are also ramping up their cloud computing offers. The connection might be that banks will be hard pushed to throw a lease agreement over a cloud computing deal but then banks are not minded to lend anyway. IT companies, however, are dependent on a regular corporate equipment refresh. There is some needs and some musts here.

So in short machinations in IT are closely linked to cloud computing and computing finance. Here we witness, I believe, a bigger change in finance than we are seeing on the High St or Main St. In my view no sensible CFO will go forward without diversifying their funding sources for IT so lease will maintain a role but cloud is a financial portfolio necessity.

When Google was first released I took the view it was a poorish search engine with a fast interface.  Alltheweb had a better index, better returns too for a while, and was as fast as Google so I stuck with the Norwegians for quite some time before succumbing to Google mania, I guess partly because I became a blogger and saw an opportunity for revenues if I became more of a fan boy.

I picked this up today from Cnet in an article called “Drawing the battle lines”.

“Google has been known to tweak its search algorithm hundreds of times per year, or that the Facebook home page goes through major facelifts on a regular basis.”

The idea is that these two are multiple innovators going head to head in a struggle for dominance of the social web – in reality they both need to do more in mobile but I think Facebook has that won on the social networking side.

Why I was attracted to the article is because it provoked the contrarian in me. I don’t believe Google tweaks its search algorithms that much. Its index is quite poor and increasingly irritating because it is forever tweaking its ad sense algorithms, in effect neglecting its search platform.

Anyone wanting to do serious business research will be suffering credibility if they rely solely on Google for online data. The search for diversification has distracted them, the plaudits of the Google way have done something weird to their business acumen (call it vanity), and I think they’d be better getting back to being pretty good with search.

From BusinessWeek/Bloomberg:

Smartphones may soon displace some of the estimated 1 billion credit and debit cards in American wallets. AT&T (T), Verizon Wireless, and T-Mobile are planning a venture to develop a mobile payment system that works with smartphones, posing a new threat to Visa (V) and MasterCard (MA), three people with direct knowledge of the plan say.

I had a demo from Visa about a year back of their smart card payments systems (as there are more than one!). Of course Visa and Matercard customers are incentivised as well as punished for their use and overuse of their cards. Verizon and T-Mobile have to work out their customer relations strategies and all the pull and push that goes with it – and with the vast partner networks, and debt collection, that support M and V’s activities. I won’t be saying goodbye to my credit card just yet – not until someone works out a better way of the non-card activity.

I’ve been playing this evening with the World Economic Forum’s interactive charts, logging the different criteria that go into innovation readiness – in this case “readiness” means do you have the communications technologies, business environment, regulations and education system that set you up for greater things.

First I was looking at venture capital availability versus technology availability. What is of interest to me below is that Sweden and the USA are equally equipped with VC availability and technology but Germany, which is a more successful economy right now, lags both in VC availability. This adds to my feeling that the VC as an engine of innovation is faltering.

I also took a quick look at availability of venture capital vs intensity of local competition. Here we see everybody lags Germany in local competitiveness.

Now look at the state of cluster development vs good math and science education. The US, Germany and Sweden as well as Japan are strong on clusters but Finland and Singapore outstrip them on math and science, as well as  being more or less equals in cluster development.

Finally here is cluster development against venture capital availability. In this diagram it looks as though Germany lags its main rivals in cluster development and in VC availability. The USA however scores high on both clusters and VC availability. The conclusion you might want to draw is that neither VC availability nor clusters are as critical as intense local competition.

This from Robin Murray at the Young Foundation is an interesting set of claims around the new era of production where we are the designers and makers, the uber prosumer.

There’s a lot of truth in the argument and it goes further – we will produce energy for the grid, and food in modest quantities, provide more deeply formed local services,  earn revenues from our contributions to prosumer activity, and we will exchange in our virtual marketplaces, where our identities will be deeply validated by such measures as our energy consumption. What will be the role of the public sector locally – not to create jobs but to enable this transformation, and to ensure that the economy is configured for local needs even as it plugs into global networks. Managing this balance!

This from the Wall St Journal July 17th 2010. I am adding it to my new city category. See also:

Paved roads, historical emblems of American achievement, are being torn up across rural America and replaced with gravel or other rough surfaces as counties struggle with tight budgets and dwindling state and federal revenue. State money for local roads was cut in many places amid budget shortfalls.

Dan Koeck for The Wall Street JournalProject supervisor Jerry Brickner checked a county road recently converted to gravel in Jamestown, N.D.

The heavy machines at work in Jamestown, N.D., are grinding the asphalt off road beds, grading the bed and packing the material back down to create a new road surface.

In Michigan, at least 38 of the 83 counties have converted some asphalt roads to gravel in recent years. Last year, South Dakota turned at least 100 miles of asphalt road surfaces to gravel. Counties in Alabama and Pennsylvania have begun downgrading asphalt roads to cheaper chip-and-seal road, also known as “poor man’s pavement.” Some counties in Ohio are simply letting roads erode to gravel.

The moves have angered some residents because of the choking dust and windshield-cracking stones that gravel roads can kick up, not to mention the jarring “washboard” effect of driving on rutted gravel.

But higher taxes for road maintenance are equally unpopular. In June, Stutsman County residents rejected a measure that would have generated more money for roads by increasing property and sales taxes.

“I’d rather my kids drive on a gravel road than stick them with a big tax bill,” said Bob Baumann, as he sipped a bottle of Coors Light at the Sportsman’s Bar Café and Gas in Spiritwood.

I picked up this ppt from BusinessInsider. I’m not a regular there but maybe I should be. The ppt is from Richard Koo, Chief Economist at Nomura and it compares European and US economic conditions with the deflationary record of Japan since the early 1990s. They are eerily similar. The lesson for me is recessions mutate. You cannot expect one to be exactly like the past and policy has therefore to be imaginative rather than derivative. I still claim that dealing with people’s credit card debts would have been the best way out of this recession because it will freed people to spend and it will help the banks simultaneously.

The Harvard Business Review website published the first of a couple of posts starting with the methods and early results of fiveideas research today:

http://blogs.hbr.org/research/2010/07/every-day-in-the-english.html

Please take a look – I’m really keen toget feedback.

Are we or are we not out of recession? If you live and work in the United States you can argue, of course we are, and have been for some time – though it’s a jobless one and we fear a double dip. And whatever’s happening nationally there are debt problems at State level that are making local decision making tougher and tougher.  This last point is what matters because once national policy stops, local policy makers have to tidy up. We are entering a new era for place management.

In contrast to American optimism, analysts around Europe – and I guess elsewhere – are gearing up for an anxious week. On Friday the European Union publishes results of the bank stress testing procedures. What is a stress test? The test seems to be a systemic one – what happens if bank (a) goes under? How will the system cope? Which banks might go under? We’re unlikely to hear an answer to the latter.

But but….. still, you might argue the big test should be what happens if a sovereign state defaults on its debts.

A legitimate answer to this is when Greece looked likely to default the European Central Bank stepped in. The question now though is whether there is any juice left in the tank if Spain or even the UK default. The UK Office for National Statistics last week announced that UK public debt is five times its published level at 5, not 1, trillion GBP. Spanish debt levels far exceed those of Greece.

So the answer to the question, are we out of recession probably comes down to – have we yet found out how deeply troubled the system really is?

The headline debt figures are a cause of unease. But there is an even bigger issue, the big idea if you like, which is what would life have been like these past twenty years if we had not been running a massive fiscal stimulus without telling anyone?

We need to imagine what we might have been prepared or forced not to do, what new structures would not have emerged, and what would have been a more natural trajectory for society during this period to give ourselves some sense of what a legitimate reordering might look like.

It seems certain that only a fraction of those Europeans who now have second homes in sun spots, would have taken that risk. Spain’s property debt is an indication of how that dream should have remained fantasy. I wonder also in the UK would people have paid over the odds for housing near to good schools and if not would these schools have been able to cement their reputations?

Britain’s spatial history changed over the past twenty years as parents paid not so much for the school but for the property near the school. Would this desperation over a child’s future have been more constructively channeled (and more cheaply channeled) into participation in the education or political system to ensure better schools all round, rather than parents specialising in urban geography? Where did the tipping point come, the one where parents decided that individual action should take precedence over participation.

And would the disaffection with taxation have become so well consolidated that in the USA they are now churning up roads rather than maintain them at taxpayer expense? Somewhere in the past twenty years we have redefined common good. Will stress test Friday change that?

We now face a short term future that is orienting us towards resolving systemic problems at the institutional level. Getting banks in order, reducing quangos, reducing debt, when in fact the future needs addressing at an individual and moral level. Individual in the sense that we are less likely to be participants than we were; moral in the sense that Governments need to address how individuals behaved and what decisions they made, partly to relieve their debt burden and partly to ask big questions again of them NOT about whether or not we can and should reduce the role of Government but instead about how we can improve the decisions of people.