MeanGene Rants 16 April 2003
Cool Stuff
·
Nuclear
Fusion Research Progresses at Sandia http://www.sandia.gov/news-center/news-releases/2003/nuclear-power/Zneutrons.html
·
The
World's Largest Batteries, a Way to Recharge our Power Grid? http://www.technologyreview.com/articles/fairley0303.asp
·
Living
Batteries - Hail the Geobacter http://www.suite101.com/article.cfm/microbiology/88656
Recently
at the Cal Academy of Science my wife and I were treated to Amory Lovins, one
of the most famous people you've never heard of. He is the founder of the Rocky
Mountain Institute, Time Magazine Hero for the Planet, a Harvard trained
experimental physicist, MacArthur Fellow and winner of prestigious awards
you've also never heard of like the Nissan, Shingo, Mitchell and Onassis
prizes. The Wall Street Journal named Lovins one of 39 people "most likely to change the course of
business in the '90s". Car magazine ranked him the 22nd most powerful
person in the global automotive industry.
Amory
Lovins is a natural capitalist. In fact, he and his wife invented natural
capitalism. (http://www.naturalcapitalism.org) If he weren't intelligent and
well-balanced, he might be called an environmentalist. But that word often
reeks of hippie sweat and flowered T-shirts. Lovins is decidedly more starched
collar and understands that capitalism drives the world.
But the
drivers of our economic world are often missing half the picture, according to
Lovins. He offers insights into the missing half of capitalism to a host of
companies who hire his team of consultants and researchers. These companies
then use that knowledge to beat their competition. Mercilessly.
Sometimes
seeing this other picture is just a matter of recognizing when an old reliable
trend has worn out. One such trend that is no longer true defines the essence
of Natural Capitalism. In the industrial revolution natural resources were
abundant and labor was the limiting factor of production. Most businesses still
operate under these assumptions. Now, there is a surplus of people and natural
capital--natural resources and the ecological systems that provide vital
life-support services--is scarce and relatively expensive.
"Natural
Capital refers to the earth's natural resources and the ecological systems that
provide vital life-support services to society and all living things. These
services are of immense economic value; many are literally priceless, since
they have no known substitutes." (http://www.rmi.org)
So how
does that perspective translate into ways in which smart CEO's can beat their
not-so-smart competitors? Drawing from the conversation with Lovins and his
book, Natural Capitalism, I pulled out five ideas. Given the time and place of
the conversation with Lovins (in California which is coming off a huge
financial disaster with electrical power on the eve of the war with Iraq), the
examples focus on the military and electrical power.
The U.S.
Navy has completely shifted its policies for building design based on
consulting and training from the Rocky Mountain Institute staff. RMI staff
preach integrated design that considers all aspects of the environment around a
building and the people who will inhabit it. Lovins cited how $15B worth of
building contracts were suddenly pulled away from architects and designers the
Navy had worked with for years because they had never spoken of integrated
design and had no idea how to make energy efficient buildings.
Energy is
something the military understands, and not just because of the Gulf Wars.
According to Lovins, the US Military is the largest consumer of energy in the
world and the largest consumer of oil in the United States. One third of the
Pentagon budget is slated for moving people and things around. The Navy has
been so impressed with the energy savings in their new building designs, they
have asked RMI for an overall energy report card.
Accounting
is one area where the Navy will undoubtedly get a bad grade. The brand of
capitalism that ignores natural resources is so engrained in our culture that
important accounting issues fail to enter into the equations. The designs of
some of our tanks and planes basically ignore the costs of fuel. The fuel
itself is fairly cheap. But the full cost accounting approach Lovins brings
reveals that the cost of delivering fuel to some military vehicles reaches
$800/gallon. Still the assumption in the design of these vehicles is that fuel
costs are zero. Score an F on accounting.
Lest one
think the military is just wasteful and that no CEO of a major company would
make such a mistake, Lovins cautions that the military is often much smarter
and quicker to respond to good ideas. A quick reading of Natural Capitalism
reveals such a stream of similar anecdotes from industry that one would think
there is a conspiracy among designers and accountants to ignore costs of
natural resources. It isn't a conspiracy. It just that a new perspective
focused on long discarded factors of capitalism can reveal obvious holes.
Sometimes
the holes aren't so obvious, but again the unique perspective Lovins brings can
reveal them, as well as a new path around. Many have seen an obvious problem in
the electrical power industry. Competition among producers should reward those
who are most efficient. More efficient production should lead to less
pollution. But a power company will never be incented to sell consumers less
power. In fact, in a free market, they are always incented to sell consumers
more power. They would be happy to have us all wasting electricity.
The
answer, for Lovins, isn't regulation. It is shifting the nature of the
business. Consumers shouldn't buy light bulbs and electrons, they should buy lighting
services. The incentive for the service provider is then to provide lighting as
efficiently as possible because he keeps the savings. The consumer doesn't have
to invest in expensive bulbs or buy electrons, his service provider does that
for him.
In
Natural Capitalism, Lovins cites examples of selling warming services instead
of gas to heat homes, cooling services instead of air conditioners and floor
covering services instead of carpets. The trend is growing because the service
sellers strive to save the customer money whereas their competitors strive to
sell them more goods.
In
another example of rethinking existing business models, Lovins takes the view
that a hydrogen fuel cell car should not be thought of as a car. Cars are
parked 96% of the time, and Lovins has a better use for them. A fuel-cell car
is a portable electricity generation system. A parked fuel cell car can sell
electricity to the office building where its owner works. Now that is a truly
different business model.
In the
natural world, there is no waste and there is no toxicity. Taking the
perspective that businesses are parts of an ecosystem in the same way that
animals and bugs are, Lovins' vision reveals opportunities. According to
Lovins, the heat generated and wasted by American power plants represents more
energy than the entire country of Japan consumes. To the power industry, this
is waste; To Lovins, a ripe opportunity.
One of
Lovins' heroes is Taiichi Ohno, the father of Toyota Production Systems. Ohno
used the Japanese word "Muda" to describe "any human activity
which absorbs resources but creates no value." Creating a framework to
eliminate muda by not producing things or by finding a use for everything that
was produced, Ohno built Toyota into one of the most efficient automotive
manufacturing companies in the world.
Finally
like any good ecosystem, we return to where we started. Natural capitalism
recognizes a trend that is no longer true - natural resources are no longer
plentiful. Right-sizing, in the case of electricity generation, recognizes
another trend that is no longer true. It used to be that power plants were
unreliable and the distribution grid was cheap. Since the 80's, Lovins says,
this trend has flip-flopped. Today 98% of power outages are caused by the
distribution grid, not by the power plants, and the grid is sometimes the
greatest cost of electricity.
The
solution Lovins offers is right-sizing. Small, distributed power plants offer
207 benefits over large centralized plants. His book "Small Is
Profitable" lists them all. The Technology Review article listed above (http://www.technologyreview.com/articles/fairley0303.asp)
describes another way that the power distribution might be reinvented with
small (relatively) distributed batteries, and once again, it is the US military
leading the charge for change.
It may
not be an additional accolade he would list, but Amory Lovins is the new
recipient of the Hero of MeanGene award.