Salman's blog

The Rhyme in Generations of Disruptive Platforms

noreply@blogger.com (Salman FF) — Mon, 11 Jan 2016 21:45:00 +0000

I like the very narrow definition of Platforms suggested by @chamath. It is hard to resist quoting him in full:

“I was in charge of Facebook platform. We trumpeted it out like it was some hot shit big deal. And… [Bill] Gates said something along the lines of, ‘That’s a crock of shit. This isn’t a platform. A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it. Then it’s a platform.’ If you apply that simple methodology to any company that says they’re a platform, there are only 3 platforms in the world! You know? Windows is a quasi-platform, decaying, but still, iOS is platform, and Android is platform… these [other services] aren’t “platforms”, these are APIs, these are developer tools, which is good, and it’s a bridge to something, but it’s not a platform, so let’s stop calling it a platform, let’s call it what it is, which is a bunch of endpoints.”

I would only add that besides Windows, or rather “Wintel”, which is a Platform for the “PC”, Lintel (or Linux plus Intel) is also a Platform – albeit one that powered the server side, and which isn’t dominated by a single Company. In fact, this commodity hardware Platform built with Linux and other open source software (from LAMP to Hadoop) powered the rise of all the companies offering Cloud services, whether they built their own data centers like Google and Facebook, or outsourced them to AWS or Google’s App Engine.

Like @chamath, Benedict Evans, who discusses the move from a PC ecosystem to a Mobile ecosystem, didn’t see the need to separate out Lintel from Wintel either, and he lumps them together as the “PC.” That may make sense from a hardware ecosystem perspective, but thinking of Wintel and Lintel as two different Platforms can help us listen better to the rhyme of history (for, as Mark Twain has indicated, history may not repeat itself, but it certainly does rhyme.)

And with this perspective, as illustrated in the table below, there does seem to be a certain rhyme in the rise of new Platforms. It is most striking that new platforms don’t seem to disrupt the previous generation Platform. Quite the opposite in fact: they depend heavily on the previous generation, without which, they could not thrive. But they do tend to disrupt or replace the generation before last (in an “alternate rhyme scheme”, ABAB).

For example, Cloud services would not be possible without the dominance of the Wintel PC and the browser, but the Cloud didn’t replace the PC – it replaced proprietary server stacks (eg mainframes) and disrupted their business model. Similarly, the current Mobile ecosystem relies heavily on the Cloud and its services (forming the foundation of the app ecosystem). But as Ben Evans points out, today, “Mobile” is effectively on its way to replace the PC. Again, it is not replacing the preceding generation of Platform, but the penultimate one.

Platform Generation	Hardware	Emblematic Company	Client / Server	Dis / Aggregators	Disrupts / Replaces
Main frames / Minicomputers	Proprietary	IBM / Sun	Server	N/A	Typewriters etc. etc.
PC (Wintel)	PC	Microsoft / Intel	Client	Dis-aggregator	Terminals etc. etc.
Cloud (Lintel)	PC	Google	Server	Both	Minicomputers/ Main frames
Mobile	Mobile	Apple (IOS) / Android	Client	Aggregator	PC (Wintel)
The Next New Platform	Mobile?	? ?	Server?	Both?	Cloud?

In the table above, I have also indicated a Chirstensenian accordion of aggregation and disaggregation performed by each generation of Platform. But I would note that Cloud services are both aggregators and disaggregators. They are built on an aggregated (or integrated) stack of software and hardware to deliver their services. Yet, each of those services can also be seen as a specific disaggregated service offering a sliver of functionality “as a Service.”

It is also striking that, seen this way, Platform generations swing back and forth between client side and server side dominance, like a metronome.

So if we let this music play a little longer, we could surmise that the next great Platform will emerge on the server side, based on an integrated Mobile hardware stack that offers slivers of disaggregated services which will disrupt the Cloud!

Simple enough!

This wouldn’t mean that this Mobile hardware stack will just be used in Google’s data centres to do the same thing Google’s servers are doing now — that may happen, but that won’t constitute a new Platform. New Platforms inevitably involve new services, use-cases, and value propositions. Arguably, the same way Google’s servers disrupted mainframes by starting out as less serious “toys” delivering slightly different value propositions, this new Platform will not substitute Cloud services directly, at least to begin with.

Yet if we indulge in the outrageous results of such an interpolation, we could well predict that these little devices will eventually replace Cloud Services as we know them today.

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(cross posted on medium)

JLoS for Objective-C

noreply@blogger.com (Salman FF) — Mon, 14 Apr 2014 20:53:00 +0000

Over the past few years, I’ve been getting back into coding, starting with App Engine and then javascript, and onto phonegap and then some native app code. The one thing that I’ve always felt very uncomfortable with is sql and all formal data structures (such as "core data” in x-code.)
So a couple of years ago, I came up with a very simple javascript object I called “JLoS” - which stands for JSON for Local Storage. It’s just a few lines of code, but I found it very useful for phonegap and web development. Basically, it’s just a json object, which you initialise with a file name and save it to local storage…(Posted originally on pastebin and more recently on github)
It’s just so much easier to work with JSON than formal data structures, whether on the server side (ie MongoDB) or locally in javascript or native apps. I have no idea what other people do to manage simple data structures, specially on a browser based app where the options seem to be hovering in no man’s land.
There is less reason to use jlos on native apps, but if you are downloading and uploading json in any case, why would you want to start converting it to fancy Core Data structures?
So last weekend, I created JLoS for objective c… and put it on github.
Not that any one would notice ;), but the concept is similar to JLoS for javascript, except that it is just an “nsdictionary” saved to file... Or you can think of it as and extended and extensible NSUserDefaults. It is also similar to “Core Data” which, to my surprise has some of the quirks of jlos. (eg Since you can create multiple instances of the object from the same file, you have to make sure you manage reading, saving, and refreshing its content and to coordinate updates among the different instances.)
In some places, the formalism of core data obviously serves well, but often you just want to store loose data structures in files and that’s what JLoS does… and objective c is very good to at transforming between json and nsdictionary so it's easily exportable too.
Hopefully some people will find it useful.

The “App Store” of Text

noreply@blogger.com (Salman FF) — Mon, 05 Sep 2011 09:10:00 +0000

A couple of weeks ago, Albert recommended “The Information” on his blog. 5 clicks, and a few seconds later, I was already reading the book on my phone. (And once I had finished the free sample chapter, it took me only two more clicks to purchase the book and continue reading!!)

5 clicks and I had the book! This wasn’t the first kindle book I had read, nor the first review I clicked on, but I was suddenly struck at how easy Amazon had made it to buy and read books. And it made me think of a few of the many reasons why the iphone / ipod touch / ipad app store has been so successful:

1. Apple made it super easy to buy apps (and for developers to sell them.)

2. Apps were relatively cheap. (I remember when my son wanted to buy the FIFA Soccer game on the PSP a few years ago, it cost CHF50+, while the ipod touch app was only a few bucks.)

Before the apple app store, so called "apps" were stuck between being either free on the internet or too expensive on game consoles. The app store created that middle ground, where apps could be bought (ie they were not always free) but they were still relatively cheap, and they were all only a couple of click away. Cheap and Easy: That expanded the market tremendously and the rest is history.

It strikes me that news content has also been stuck between “free” and “too expensive” for a long time now. And content providers have only been able to play with the price lever, because it is hard for any one content provider to make it easy enough to buy text content.

Sometimes I come across a link to interesting content behind pay walls - an article in a magazine or newspaper, or an in-depth analysis on a blog, or even a recommended academic paper. I would like to read these, and I would be willing to pay something for that content. But to access the text, I am forced to go through the pain of registering on a web site, or paying for a subscription, all of which is way too painful. Imagine how successful the app store would have been if you were forced to buy a subscription to multiple apps every time you thought of downloading one $0.99 app! The same goes with "text" content. I would be willing to pay for it, but I would be willing to invest only so much time, clicks and money to access each article. I don't want to subscribe or even register to read an article I just found –it’s just too difficult, and so I move on to other free content on the web.

But if I was only a couple of clicks away from those texts, I would certainly be far more tempted to pay for the access.

This must be a huge opportunity for Amazon - to sell individual articles by all major publications and many a blog. I can’t believe that my only options on Amazon kindle today are to buy full subscriptions or a full magazine. What nonsense! When I reach the "free summary" web-page of a pay-wall article, I want a “read this on Kindle” button, offering me to download the article in a few seconds and only a couple of clicks, for say $0.09 cents for a news article or a few bucks for research. But I don't want to enter credit card details or even sign in using Google or Facebook or what have you. I am only willing to spend a couple of clicks of time.

Text content providers (newspapers, magazines, blogs etc) have been struggling for so long to find the right balance between providing free link-able content, and being paid for their good work. But they are still stuck between free and too-expensive. And they have not yet adapted to the distributed world of online content, where people don't necessarily want to be forced to "subscribe", whatever the price. It's not easy to subscribe!

Someone has to experiment with an App Store for text, making individual articles and research cheap and easy to access. And Amazon is probably the one big company in an ideal position to do just that.

What's next now?

noreply@blogger.com (Salman FF) — Sun, 21 Aug 2011 22:55:00 +0000

Back in 2007, before the iphone had even launched, when Brad Burnham asked ‘What’s Next?’, I pointed to Christensen and said:

“Christensen paints a picture of various elements of a ‘stack’ disintegrating and re-integrating (ie re-aggregating) over time with value moving back and forth between those elements (thus his “law of conservation of attractive profits” referring to adjacent elements of the stack going through cycles of commoditization.) … An obvious example: the PC disintegrated the computing-device stack and pushed value to some of the individual elements of the stack – benefiting Intel and Microsoft among others. More recently, the ipod (and to some extent the mac) has reintegrated the stack arguably shifting value back to the ‘hardware’ or ‘device’ as an aggregated whole.”

Four years on, with the success of the iphone and the Kindle, and now, Google’s decision to buy Motorola Mobility, the “integration” cycle seems to be nearly complete.

"Nearly": First off, it seems unlikely that Google will become an integrated player like Apple is today. My bet would be that Google integrates not only Motorola’s patent portfolio but also much of their technology expertise and talent to create reference architectures designs and may be key hardware for their partners like Samsung. But once Google integrates the key engineering teams, it can only make sense for them to sell the Motorola brand, distribution and a hollowed-out hardware business to a company like HP. Ironically, this Googorola may begin to look more like the wintel of the 1990’s (without the Motorola brand.)

So what’s next then? What is the next big strategic shift (say, 3-4 years from now), which could put us back on a dis-integration cycle?

Purely theoretically, it seems like that value could shift to the network – ie the mobile operators. But that seems so unimaginable at this point, that I will leave it there.

What else, besides Microsoft ( ;-) ), could save us from the constraints of a Google / Apple duopoly, and jump-start dis-integration? The only things I could imagine are (1) HTML 5, and (2) personal information integrators.

1. HTML 5 could finally render the os obsolete… finally(!) That’s what everyone hoped and/or feared from the early days of Netscape, and ironically, it could make a Firefox the new king maker (again.) HTML 5, built on the advanced hardware platforms of a couple of years from now could remove much of the advantages of integrated platforms like Apple and Googorola. Evolving standards would create a seamless experience even in a dis-integrated world. The OS wouldn’t matter to the experience, and nor would the hardware. And the equivalent to the App Store or Android Market would be distributed, like the web is today, but with room for giant market makers like Amazon.

2. Be it Facebook, Google+, or even iCloud or a Dropbox, or rather I hope, a still to be formed startup, one or more companies may be able to build on top of the existing stack and create value by solving one of the other much sought-after holy grails of the internet – to be a repository and manager of your information and interactions across devices, clouds and web services. Such an animal will free us from increasing constraints imposed by the integrated stack duopoly, and shift value creation away from the existing stacks to itself… One can only hope that the winning solution here will be an open-source / open-data P2P platform.

That’s what the world is looking like to me.

(If I turn out to be way off, I will need to blog more often to push this post down beyond page 1 and into oblivion.)

Visionary Perseverance vs Stubborn Stupidity

noreply@blogger.com (Salman FF) — Fri, 19 Jun 2009 21:16:00 +0000

A few days ago, I heard a talk by RE-Power’s CFO. He took us through the company’s quite incredible journey. In early 2005, the company was a cash strapped sub ~€70m market-cap company, and no investor was willing to put any money in it. But by 2008, the stock price had gone up ten fold and the company was worth a couple of billion euros.
One of the conclusions of the speech was that if you believe in what you are doing, you should persevere, and you will be successful.
One hears this conclusion quite often in the retelling of success stories. But the problem is that when you hear about stories of failure - and normally such stories do not make it to a key note address – it is told by the investors who were smart enough not to invest. “Every one told the CEO it was a stupid idea, and he just went on wasting his time on it. It was clear it was going to fail.”
It seems that the line separating “stubborn stupidity” from “visionary perseverance” can only be drawn in retrospect.

A Case for CATs

noreply@blogger.com (Salman FF) — Wed, 17 Dec 2008 22:20:00 +0000

I have been working on this paper in bits and pieces since the summer. It is a position paper advocating a "Carbon Added Tax" on embodied emissions.

This is the intro:

A Carbon Added Tax (CAT) is like a sales tax on the carbon emitted to produce the goods and services we consume. From the CAT perspective, when you buy say, a computer, you are responsible for the carbon emitted in producing its mother board and the hard disk and each subcomponent in the computer, as well as that emitted from the fuel burnt by ships and trucks transporting it, and to power the electricity in the shop selling it. A CAT levies a tax on the consumer for all this “embodied” carbon, at the point of sale.

This paper argues that a CAT represents a better way to affect global carbon emissions, because it leverages the global nature of the world economy to cut through geographic and legislative boundaries. The paper also addresses the major arguments against the CAT – the assumed difficulty of measuring embodied carbon and administering the tax. It discusses the latest developments in this area, and proposes structural incentives to overcome those obstacles.

And here is what's in it:

The Moral Imperative: Consumer vs Producer Responsibility
The Quantitative Impact of the Consumer Responsibility Perspective
The Economics: A Global Public Good
Structural Problems with the Producer Responsibility Paradigm
The CAT in Practice
Accounting View: Counting Carbon for CATs
A Philosophical Note: Archimedes’ Lever
A Time to CAT?
Conclusions

Macbook Environmental Report

noreply@blogger.com (Salman FF) — Wed, 15 Oct 2008 21:44:00 +0000

Kudos to Apple for putting out an environmental report on their new Macbooks (via earth2tech).

Of course, I will have to point out that Apple estimates its embodied emissions (ie emissions from production and transport) to be 60% of the total lifecycle emissions of the product, versus 39% for customer use. Not to repeat myself too often, but why is it every one seems to be focusing on the 39% portion?

The CAT is out of the bag

noreply@blogger.com (Salman FF) — Sun, 27 Jul 2008 16:29:00 +0000

I’ve been toying with the idea of a Value Added Tax on embodied carbon, and I’ve been meaning to put some thoughts in writing. So I came up with what I thought was the brilliantly original acronym: CAT for a “Carbon Added Tax”.

Then I did a search, and found that Nobel-laureate Joe Stiglitz recently proposed the same idea:

"A carbon added tax (CAT), levied at each stage of production, would have some of the same advantages that a value added consumption tax has. Each producer would have to show receipts for the carbon tax paid on inputs into its production. The taxes levied at each stage of production would be passed on to consumers. It is as if the tax were imposed on consumers… A carbon value added tax will both discourage production in more carbon intensive ways and discourage the consumption of carbon intensive goods."

His proposal pretty much sums up my thought process…

But perhaps even more interesting is that some one called Ewan O'Leary, registered the URLs for carbonaddedtax.com and .org last February. Now that is some real forward thinking!!! ;-)

OUR personal data on the web

noreply@blogger.com (Salman FF) — Thu, 17 Jul 2008 10:07:00 +0000

Our data is born free, but everywhere it is in chains.

We need a new "Social Data Contract" for the web.

Letters to Economist Editors

noreply@blogger.com (Salman FF) — Fri, 11 Jul 2008 20:01:00 +0000

I read the Economist religiously - or rather I partly skim and partly read the Economist religiously every week. So it was nice that they published a letter I wrote them. (Of course, it relates to Embodied Emissions.)

What was surprising is how much they edited the letter. At first, I was taken aback: after all, they had lost the nuance of some of my points. On reflection though, it is quite amazing and flattering that they would take the time and effort to completely re-write such letters to drive home the point they think is worth publishing.

In any case, here is the original letter I sent:

Dear Sir,

Your article entitled “Emissions Suspicions” (June 19 2008) ignores the principle of “consumer-responsibility” - that consumers can be responsible for the carbon embodied in the goods they consume. If our society decides to proactively reduce its total carbon emissions, it makes little sense to just focus on the carbon being emitted (or “produced”) directly in our society. For example, a study by Oxford’s Dieter Helm showed that while “UK greenhouse gas [emitted directly in the UK has] fallen by 15% since 1990…on a consumption basis, the illustrative outcome is a rise in emissions of 19% over the same period… Trade may have displaced the UK’s greenhouse gas appetite elsewhere.” Whether this displacement was caused by carbon regulations or other factors is less relevant - What matters is the total amount of carbon that was emitted to produce the goods and services consumed in the UK.

As such, a “carbon tariff” on embodied carbon should not be compared to traditional “import taxes”. The correct analogy is a “Sales tax”. Today, governments tax goods and services both at the point of production (via corporate taxes) and consumption (via VATs or other sales tax). But emissions regulations to-date have been aimed solely at the “production” of green house gases. It is the principle of reducing carbon “consumption” that matters more than the economic implications of leakage (which is the focus of your article.)

But is this principle practicable? Your article also claims that assessing embodied emissions is an “impossibly complicated task.” But much work has been done in this area, specifically by UK based “Carbon Trust” (with the BSI and DEFRA) to create standards and make the process simpler, fair and practical. It would have been more appropriate to reference (if not, assess) these efforts in your article, rather than to dismiss them out of hand, as impossible.

Regards,
Salman Farmanfarmaian
http://salmanff.blogspot.com/
Geneva, Switzerland

And here is how it was reprinted:

Green consumer-taxes

SIR – If a society decides to proactively reduce its total carbon emissions it makes little sense just to focus on the carbon it directly produces (Economics focus, June 21st). For example, a study by Dieter Helm of Oxford University shows that although greenhouse gases emitted directly in Britain had fallen by 15% since 1990 measured by the conventional method, “on a consumption basis, the illustrative outcome is a rise in emissions of 19% over the same period” and that “trade may have displaced” Britain’s “greenhouse-gas appetite elsewhere”.

Whether trade displacement is caused by variances in carbon regulations among countries, which you focused on, or other factors is less relevant than the total amount of carbon that was emitted to produce the goods and services consumed in a single country. As such, plans to introduce a “carbon tariff” on goods imported from countries such as China misses the point. Consumers are responsible for the goods they consume and the carbon emitted to produce them.

Emissions regulations have so far been aimed solely at the production of greenhouse gases, but governments tax goods and services at the point of production and consumption. It would therefore be more sensible to introduce an emissions “sales tax” rather than a carbon tariff.

Salman Farmanfarmaian
Geneva

I wonder which version is better.

The Polluter is the Consumer

noreply@blogger.com (Salman FF) — Tue, 24 Jun 2008 08:47:00 +0000

Here is another high level analysis of embodied carbon in imports by Oxford’s Dieter Helm (et al). It looks at the UK’s carbon emissions from the “consumption point of view.” The paper notes that using conventional producer-based carbon accounting-methods,

“UK greenhouse gas emissions have fallen by 15% since 1990. In contrast, on a consumption basis, the illustrative outcome is a rise in emissions of 19% over the same period. This is a dramatic reversal of fortune… It suggests that the decline in greenhouse gas emissions from the UK economy may have been to a considerable degree an illusion. Trade may have displaced the UK’s greenhouse gas appetite elsewhere.”

The same paper has a well-articulated overview of the “consumer vs producer” paradigm:

“Both these [currently used] methodologies are based on the location of the production of greenhousegases. This, however, is a somewhat misleading and partial basis for policy purposes. For a country could have a very low production of greenhouse gases, but at the same time have a high consumption level. It could produce low-GHG-intensity goods, but import and consume high-GHG-intensity goods. Thus, a developed country might cease to produce steel, aluminium, glass and chemicals domestically, but import the manufactured goods from abroad. In the UK’s case, the shift of production in such activities to China, India and other developing countries in the last two decades suggests that this effect may be considerable… China might argue that, although it produces high emissions, these are on behalf of consumers in developed countries, and therefore the consumers should pay for the relevant reductions. In this way, the polluter is not the producer, but rather the consumer.”

Also, the paper finds that “by 2006, the trade deficit in greenhouse gases [in the UK] was 341 MtCO2e, around 50% of domestic UK greenhouse gas emissions.” Another data point in understanding our total carbon footprint.

____________________________
Notes:
Thanks to David McKay’s blog for pointing me to the above paper.
Also - Bold emphasis above added.

Transportation and Carbon-Conscious Consumers

noreply@blogger.com (Salman FF) — Sat, 03 May 2008 20:33:00 +0000

As a sector, transportation is certainly a significant source of carbon emissions. But perhaps because it is so visible, or even tactile, transportation gets a lot of attention, and people tend to overstate its role in embodied emissions. Some recent NY Times articles make references to some related data which are worth quoting:

From the Green Issue of the Magazine: “It is the locavore’s dilemma that organic bananas delivered by a fuel-efficient boat may be responsible for less energy use than highly fertilized, nonorganic potatoes trucked from a hundred miles away. Even locally grown, organic greenhouse tomatoes can consume 20 percent more resources than a tomato from a far-off warm climate, because of all the energy needed to run the greenhouse.”

The same issue also quoted the famous New Zealand studies, though in a somewhat skeptical tone: “A handful of studies have recently suggested that in certain cases under certain conditions, produce from places as far away as New Zealand might account for less carbon than comparable domestic products.”

Also, when Timberland studied the embodied emissions of its shoes, “the company was surprised to find that transportation may account for less than 5 percent of its greenhouse-gas emissions — while almost 80 percent may come from making the leather, a process buried deep in its supply chain.” (Note however that Timberland seems to have overestimated the emissions related to the leather.)

The above study is consistent with Weber and Matthews’ study on the embodied emissions of imports into the United States, which suggests that “CO2 emissions due to international freight transport are unlikely to increase the totals [of embodied emissions in imports] by more than 10%.”

In an article on the environmental impact of groceries, it was calculated that a bottle of European wine drunk in New York has 1.4kg of embodied CO2, while a Napa bottle would have 2.5kg. Ironically, in this case, the major difference does lie in transportation, since Napa wine is trucked to New York, while French wine is shipped, thus consuming far less carbon per mile shipped.

So much for drinking local (or at least national.)

Finally, a hopeful note in today’s article on transportation’s direct carbon footprint. “A paper presented by Travelport at the World Economic Forum in Davos in January… stated that consumers want information about their carbon footprint as it relates both to business and personal travel. 'That desire for information has the potential,' the paper said, 'to reshape the travel policies companies set and the choices companies and consumers make across a broad range of decisions: how they travel; when and where they travel; what airlines, hotels, and rental car companies they use; where they hold meetings and events — even whether they travel at all.'

Whatever the impact of the transportation sector on global carbon emissions, it will be interesting to watch the impact of carbon-conscious consumers on the transportation sector.

Saul Griffith’s Carbon Footprints Part II – Some numbers

noreply@blogger.com (Salman FF) — Sun, 20 Apr 2008 19:30:00 +0000

Following my previous post, I thought to look at Saul’s energy usage / carbon footprint calculations by separating out his personal energy usage from his work related consumption.

See the notes below on how I have separated the work from the personal energy usage. The chart below separates out the numbers into 4 categories, and speaks for itself. Almost half of Saul’s home energy usage comes from “Food and Stuff” which represents the embodied emissions of his consumer purchases. Of course, as Saul has pointed out, he has probably underestimated the energy usage associated with these categories.

Again, people can dispute the difficulty of calculating the embodied emissions of “stuff”, but at almost 4 times the energy usage of his home heat and electricity, Saul’s calculations should at least, again, put the importance of embodied emissions in perspective.

__________________________
A few other notes:

Like the truck driver in my previous post, Saul’s major source of carbon emissions relates to his travel for work. His total work related energy use should be compared to the value of his work, in revenues from his company or at least with the costs associated with the company. This figure should be compared to other businesses in the same sector.
Energy usage of ‘stuff’ related to work would probably need to be more comprehensive, including things like capital goods (servers, furniture), services delivered to his workplace (fedex, as well as consumables (like pencils and paper and printer toner.)

Here is the data:

Some notes on separating work from home usage:

Saul mentions that most of his air travel is for work, so I put in a “wild guess” number of 90% related to work. Inversely, I assumed 90% of his car usage was for personal (ie home) use.
In stuff, I only allocated his laptop to work. As noted above, there are probably other work related goods that should be added to his work “stuff”
The allocation of societal consumption is an interesting one. Here I have assumed it is half for work and half for home. After all, government exists to serve both individuals and to support businesses. Although the actual impact at ~3% in total is not very big, a more thoughtful method may still be needed here. For example, there could be an argument that government is there only to serve the people, so 100% should be allocated to individuals. At the same, this would distort the picture for developing nations (and the goods they export), especially since substantial government resources are probably expended on supporting businesses.

Saul Griffith’s Carbon Footprints Part I – More on Consumer vs Producer Responsibility

noreply@blogger.com (Salman FF) — Tue, 15 Apr 2008 20:45:00 +0000

“Power Consumption at work... This... brings up a very interesting point... where do you draw the lines in figuring out your own energy consumption? Does work energy go against you or the product of that work?”

Saul Griffith’s excellent presentation gives a very thorough view of carbon foot-printing, and the particular question above is quite fundamental. I would argue that personal energy consumption should be treated separately from energy use for work. The energy use related to our work should show up embodied in the product of our work.

A few examples could help illustrate why…

Say I am truck driver that delivers apples ( ;-) ) to a local grocery store. It would not make sense to mix my personal energy consumption behavior with my job as a truck driver. Even if I lead a carbon neutral personal life, mixing my stellar home footprint and my work related emissions would give a distorted view of the choices I can make – ie the factors which are under my control, in my personal life.
Now let’s imagine the exact opposite case. Let’s say you are a small business owner, doing most of your work from the office using emails and phones. Again, you could be driving a hummer from home to work, and leave your oven on 24 hours a day, but if you mix your personal and work energy usage, you would still seem more eco-friendly than the me.
Now, to drive the point home, imagine that you are my boss, and you are responsible for deciding the kind of truck I would drive. Clearly, the distortion created by mixing personal and professional energy use and footprints would make the exercise quite meaningless.

This is not to say we shouldn’t worry about our work related energy use. All of us have some say in the energy consumption of our workplace. And we can make choices to affect it. But the energy consumption of my apple delivery business should be compared with the energy consumption of other apple delivery businesses, or delivery businesses in general. The result of our work, and the energy we consume to deliver it, would both be manifested in the product of our work – in this case, an apple. So it would also make sense to use metrics like CO2 emissions per apple delivered…

Or, for practical purposes, so as to be able to generalize (and mix apples and oranges in the same truck), one could measure, CO2 per dollar of revenue delivered…

Or rather, to be able to account for each business’s share of economic activity, carbon emissions per dollar of economic value add.

(To illustrate: Let’s assume I have an apple delivery business using apples from my brother’s farm. And say you have an apple farm and deliver the apples yourself. Ultimately, we would want to compare the total lifecycle emissions for each apple. Say, you sell apples for $2 and emit 2 grams of carbon per apple, from the farm to the final delivery. My brother emits one gram of carbon per apple and sells them to me for $1. If I emit 1 gram of carbon in delivering the apples and sell them for $2, the total embodied emissions of the apples I sell are the same as yours – 2 grams in total. But if I calculate emissions per dollar of revenue, I would get 0.5 grams of emissions for every dollar of revenue – ie 1 gram for every $2 apple – which is the wrong comparison. In effect, I am emitting 1 gram for every $1 of economic value add, since I am buying the apples for $1.)

So, the best way to compare apples and apples is to compare the total embodied emissions in each product, including each part of the full supply chain, preferably in the form of a carbon label. And each part of the supply chain would weigh its emissions against the economic value that it is adding to the product, and compare that to similar businesses - ie comparing apple delivery to apple delivery.

From a consumer responsibility perspective, it would be up to each apple buyer to decide between different kinds of apples and take responsibility for that purchase decision. If an apple delivery company decides to use solar powered trucks, then that should show up on the carbon label of the apples it delivers, and affect the carbon footprint of the buyers of those apples.

Many argue that carbon labels are impractical because the carbon footprint of each product is very hard to calculate. I don’t believe that to be the case, especially if you weigh that difficulty against the total impact of embodied emissions (also see here and here.)

Carbon Emissions in Developing Countries: Producer vs Consumer Responsibility

noreply@blogger.com (Salman FF) — Sun, 06 Apr 2008 08:48:00 +0000

“Developing countries, whose economies and populations are growing fastest, [will] contribute 74% of the increase in global primary energy use [until 2030]. China and India alone account for 45% of this increase.”
World Energy Outlook 2007, IEA

So three quarters of all new power production capacity will be in developing countries. Close to half of it in India and China. And according to the same report:

“China, with four times as many people, overtakes the United States to become the world’s largest energy consumer soon after 2010. In 2005, US demand was more than one third larger.”

And...

“In the longer term, [in China,] demand slows as the economy matures, the structure of output shifts towards less energy-intensive activities and more energy-efficient technologies are introduced.”

This last sentence is the most interesting. It sounds like the basic assumption of the report is that China will make a typical progression towards a more advanced economy: As the country becomes richer, not only will it care more about the environment and prioritize more energy efficient technologies, but the economy as a whole will become more service oriented, much like that of the US. Of course, this does not mean that the world will consume fewer goods. It just means that those goods will be produced in a new generation of up and coming developing nations – and those nations would account for the ~30% of the total increased energy use until 2030.

One could imagine that, like China today, those countries will want to use the cheapest (and thus potentially the dirtiest) fuels. They might also argue that it would be unfair to impose environmental restrictions on them since they too have a right to grow their economies. Just as China points to Europe and America’s growth and how they were fueled by dirty coal, those countries may point to China along with Europe and America and make the same argument.

And from their perspective, they would be right, just as China is “right” in its argument today.

The problem is the paradigm upon which the argument relies. It is a “producer responsibility” paradigm of CO2 emissions, looking at emissions based on where they were produced or emitted, not on why they are produced, and for whom. The "producer responsibility" world view ignores the "end-user" or consumer of the products which were created using those emissions.

Many developing countries, especially in their early stages of development, rely heavily on exports. In effect, they are using much of that new energy capacity to produce goods which are consumed in the more advanced economies. A “consumer responsibility” approach to carbon emissions could create a paradigm shift. It could give consumers the leverage to make decisions on whether they want to buy products which were produced using say, a new coal fired power plant. And it would shift the debate away from esoteric arguments about the "right" of government bureaucrats to pursue their nations' best interests.

Socolow’s Wedge vs. Archimedes’ Lever

noreply@blogger.com (Salman FF) — Tue, 30 Oct 2007 21:19:00 +0000

On Platforms Versus Prescriptions

It had been a while since I first read Socolow and Pacala’s classic paper laying out the concept of “Stabilization Wedges” – the idea that we can implement several current technologies, each a wedge, to reduce carbon emissions to quasi-sustainable levels.

I didn’t feel comfortable with the word “wedge”, and wondered about its philosophical underpinnings. Why did they choose the word?

According to Wikipedia, “A wedge is… used to separate two objects… through the application of force.” (emphasis added.) Sounds like somewhat of a primitive method. (Little surprise that the wedge “has been in use as early as the Stone Age.” ;-) )

Of course the paper itself is great, in that it sets tangible goals to reduce carbon emissions, and emphasizes that the goals are technologically achievable. But the term ‘wedge’ seems to have been used just because the savings from emissions in the paper’s graph looked like wedges. No deep philosophical underpinning intended!

Except that such terms tend to take lives of their own – and in this case, the problem I have with it, is that it can take on a prescriptive connotation. Take these phrases (from the paper) for example:

“A wedge would be created if twice today’s quantity of coal-based electricity in 2054 were produced at 60% instead of 40% efficiency.”
“a wedge of nuclear electricity.. would require 700 GW of nuclear power with … about twice the nuclear capacity currently deployed.”
“a wedge from photovoltaic (PV) electricity would require 2000 GWp of installed capacity that displaces coal electricity in 2054.”
“An ethanol wedge would require 250 million hectares committed to high-yield plantations by 2054”
etc. etc.

Socolow did not necessarily intend for these goals to have policy implications – but don’t they just sound like they are calling us to use the brute application of regulatory force to implement each of the wedges?

That’s what makes me uncomfortable with the term.

Setting a goal is indeed very different from figuring out how to actually achieve it.

Imagine that, circa 1980, someone thought: “Wow – what if we had cheap computers linked up in a giant network so people could connect to each other, and find all sorts of information and buy things using this giant network. How cool would that be!”
Obviously, the goal would have been achieved less than two decades later with the internet. But that was not because some policy wonk decided to set about trying to create the end to end solution to achieve that goal. If someone had tried to prescribe such an impressive goal in a policy implementation, it would probably not have ended up with the internet… in fact, the French government tried to do exactly that, and ended up with the minitel – quite good for its time, but certainly with no long lasting legacy!

If we are going to use analogies, I much rather a lever, than a wedge… As per wikipedia: “Levers can be used to exert a large force over a small distance at one end by exerting only a small force over a greater distance at the other.” [emphasis added]

So if you want to achieve such a grand goal, I posit that is it much more effective to create the necessary levers – the basic infrastructure and the underlying ‘rules of the game’ that can unleash the power of markets, allowing thousands of individual entities to exert only a small force at great distances. To create the web, no one set out to create wedges like:

“We need 20 million computers networked together by 1995”,
“We need 3 million programmers creating web sites by 1997”,
“We need 100 terra bytes of data by 2004”, or
“We need x miles of fiber laid in the ground”.

Archimedes, the Greek mathematician first known to describe a lever, famously said: “Give me the place to stand, and I shall move the earth”. For the web, that place to stand – that platform – was created with standard protocols like HTTP, TCP and IP, which simply defined the ‘rules of the game’.

So what platform can we stand on to reduce carbon emissions? How can we define the rules of the game? And where on earth(!) is our lever?

Asian Trade and Consumption (more seriously)

noreply@blogger.com (Salman FF) — Sun, 26 Aug 2007 11:50:00 +0000

For some time now, I have been wondering if Asia’s economic growth will create a large enough middle class to eclipse the United States as the primary export market it is today. I would often venture that at some point, there could be a major economic event which will bring a paradigm shift in the way that people perceive the US economy’s power. Now, I wonder if the current sub prime crisis and a potential coming US recession will create that event.

First, some data I dug up: Developing countries in Asia imported around $1.4 trillion of goods in 2006, up from $0.5 trillion in 2002 – from the perspective of an exporter of goods any where in the world, that means that the market for imports into the emerging markets of Asia grew from around 43% of the US import market in 2002, to 77% in 2006 – almost doubling in relative size. If we count all of east Asia (including the more ‘developed’ markets of Japan, Singapore, Hong Kong and Taiwan), then that relative market size has increased from 117% of the US market in 2002, to 163% in 2006. (Should some body have been paing attention when the size of the Asian import market surpassed that of the US circa 2000? Or were we all caught up in our own post bubble trauma?)

The Economist also noted recently that “China now takes 22% of the exports of the rest of emerging Asia, up from 13% in the late 1990s.” So Asian economies, heretofore characterized by their power as exporters to the West, are now becoming significant import markets in and of themselves... and thus less reliant on the American consumer.

To date, the power of the American consumer had been such that it seemed like the whole world depended on his/her consumption habits. A recession in the US would be felt by markets all over the world. (A few years ago an American friend had told me, half jokingly, something like this: “The whole world is dependent on the irresponsibility of the American consumer who keeps loading up even more debt on his credit card to buy even more stuff, keeping the world economy afloat.”)

Even though the above data fails to differentiate between consumer goods and say, heavy machinery, the growth and transformation of Asian economies is unmistakable. So today, and if not, in the near future, when the US consumer sneezes, Asia may no longer need to catch a cold.

To some extent, this explains the continued rise in the Asian stock markets, even as European and American markets have gone through significant volatility recently. One would expect a further decoupling of the Asian stock markets from that of the United States over the coming years.

A more important implication of this trend could be the weakening of America’s political and economic position in the world. Today, much of Asia’s foreign reserves are kept in dollars. They are used to buy US government debt, which could be viewed as a rational form of vendor financing. As the non-US consumer becomes a more important part of Asia’s export market, supporting ‘vendors’ across the emerging markets may become more important at the margins. For example, China may decide to shift a small portion of its reserve dollars to buying Vietnamese debt or finance infrastructure there (to help that export market) instead of buying US bonds. Obviously, US reserves can continue to be important for all Asian economies – but the question is: how much will a small shift of attention, and dollars, away from the US, affect the American economy? Will the dollar fall even more precipitously? Will the falling dollar then cause inflation and potential stagflation as US interest rate policy faces conflicts in balancing inflation, growth, and the value of the dollar at the same time? What will it mean for the various sectors of the US economy? The financial sector may benefit from this trend for example, but will a falling dollar hurt the average US consumer even more in the short / medium term as the US economy adjusts to the new structural balance over time? In the mean while, will this trend benefit political populists and economic isolationists - ever ready to pounce from the fringes of the American political spectrum? Would such a political change further delay a real adjustment of the American economy to the new global economic regime? And as Asian economies come to depend less and less on the US, wouldn't American political influence in the region inevitably decrease, creating the possibility of a vicious cycle of all the above conjectures?

For the record, I am a global economy optimist in every way. But one has to wonder what kind of short term growing pain the increasingly global economy will experience as these relative shifts of political economic power take place and each individual economy makes the necessary structural changes to adjust to new market realities.

China as a Dollar grave?

noreply@blogger.com (Salman FF) — Fri, 24 Aug 2007 12:36:00 +0000

In the early 18th century, Britain ran a huge trade with China because of its insatiable demand for Chinese goods. It paid for all of these goods – largely tea and silk – with silver. According to this wonderful BBC program, the imbalance became so large that “China was referred to as the silver grave of the world, because every silver dollar that is minted would end up in China sooner or later.”

At some point, the British had the brilliant idea of marketing more opium to China. As per Wikipedia:

“In an attempt to balance its trade deficit Britain began illegally exporting opium to China from British India in the 18th century. The opium trade took off rapidly, and the silver flow began to reverse… when China attempted to enforce her laws against the trade, the conflict erupted.”

.. thus the Opium Wars of 1840-1843 and 1856-1860.

It’s too tempting not to draw a parallel with today, and wonder (with tongue lightly in cheek) about China as the new dollar grave of the world…

Of course, in the 18th century, financial markets were not sophisticated enough for say, the Chinese to use the silver to buy shares in the British East India Company, or finance British government debt.

Nor is Chinese military power in such a relatively weak position today…

Nonetheless, I wonder if there if the Chinese leadership, famous for its long view of history, still has the Opium wars in its conscious memory as it goes on its foreign buying sprees …

Embodied carbon emissions in electronics even more...

noreply@blogger.com (Salman FF) — Sun, 19 Aug 2007 21:36:00 +0000

Previously, I had done a back of the envelope calculation of the carbon emissions embodied in US imports, and together with Bin Shui, we had dug deeper to estimate the amount of carbon embodied in imports of electronics. Now, two academic papers (also using the eiolca.net dataset) present a more thorough analysis of the same issues and their numbers are staggering.

First, two Carnegie Mellon academics estimated the total amount of carbon embodied in US imports to be 1.3Gt. (That is the total amount of carbon emitted to produce the goods that we import and consumer in the US.) To put that in perspective, that is 22% of total CO2 emitted in the US, and more than all residential and more than all commercial emissions in the US. Below is a comparative chart, similar to the one we used in the VentureBeat article.

The other paper, co-written by the same academics, estimates the embodied emissions in imported electronic goods to be 470 MMT of CO2. To make the same kind of comparison as before, that is more than all of the local carbon emissions in the State of California.

As one of the co-authors said in a related news release:

“The central question is one of responsibility. Over the last decade, the United States' share of global carbon emissions has gone down and China's has gone up. However, if you count not by who makes the goods, but by who consumes the goods, the United States' share of responsibility has stayed constant or even gone up. However, these emissions are not counted because they've been outsourced to other countries.”

Environmentally conscious techies should really be paying more attention to these numbers!!

_____________________
Note 1: Unfortunately, none of the above articles are available for free.
Note 2: The estimates in the second paper are much higher than those we had come up with in the VentureBeat article. This is partly because of different definitions of the electronics industry, but more importantly, it is because the paper adjusts for some additional factors to give a better estimate. At the time, we decided to keep our estimates pretty conservative, first because it would require a huge amount of work ;-) to refine the estimates, and second, because the numbers were pretty large already – so we felt that our conservative numbers should be enough to make our point.

Video Discovery 'Market Opportunity' from evoketv business plan

noreply@blogger.com (Salman FF) — Fri, 11 May 2007 13:33:00 +0000

Here are parts of the evoke tv business plan written in May 2006 - exactly one year ago. It is interesting that despite everything that is going on in the online video space, there are no clear big winners in the video discovery space. I wonder whether that means the opportunity never existed, or that it is still wide open. In either case, I thought it worth while to post the "market opportunity" sections of the evoketv business plan:
_____________________________________________

eVoke TV

The Social Space Between the Internet and Your TV

May 2006

Executive Summary

eVoke TV provides an interactive space for media viewers to connect with each other, and to discover and organize their video content, whether it’s on TV or on the internet. Conceived around the idea of ‘Soft Convergence’, eVoke TV combines social media concepts with the traditionally static ‘TV grid’ functionality, to create dynamic communities around the video discovery experience.
...

Soft Convergence: With the rise of broadband connectivity, more and more TV viewers are watching television while connected to the internet. Many are using their wifi connected laptops to find programs to watch on television, or to look for more information about what they are watching. This virtual connection between the PC and the TV screen is what we call the soft convergence of media - there isn’t a physical connection between the laptop and the TV, but the laptop is helping us find content, and knows what we are watching.

Video Discovery: A virtual connection to TV/video media becomes even more relevant as we try to find the increasing amount of media which is becoming available online. Over the past several months, we have seen thousands of videos posted on sites like YouTube and video.google.com, while at the same time, the major networks have announced that they will make more TV programming available on the internet. Yet, most internet technology companies have solely focused on helping to deliver that content, thus making sure that users have access to a plethora of choices, when they want it, and where they want it. Little has been done to help users make those choices, to help them find content they might like – in other words, to help them discover what they might like to see. That is the opportunity facing eVoke TV.

Our goal is to become the equivalent of the ‘TV Guide’, for this new era of quasi-infinite content choices. We know that current mechanisms for finding content, such as the traditional ‘TV grid’, are hardly satisfying, even to parse the few hundred channels available to us via cable or satellite. The new era of quasi infinite ‘on demand’ content choices, requires an appropriate form of content discovery mechanism, one that is based the dynamism of social media and leverages the rise of social networking.

Market Opportunity

Over the past several months, we have seen an astounding explosion of video content online. Not only have sites like YouTube and Google started to allow individuals and corporations to upload video content on their sites, but the major networks have all announced that they will be offering various popular TV programming available on line. Yet, most would agree that we are only at the beginning of this trend. Over the coming years, there will more and more video content available on line. Many great companies and technologies have positioned themselves to deliver that content to us – the Googles and Youtubes are hosting video content on the internet, cable and satellite providers are hosting it on their networks and delivering it via ‘video on demand’ services, technology enablers like Akimbo are helping content producers deliver it to audiences via the internet and cable, various transport mechanisms like TiVo and Slingbox are allowing us watch TV programming any where and at any time.

With all this investment in the technology of media delivery, we know that there will be a plethora of content available to us through various delivery platforms. But with all that content available, the next important question will be: How will we find our way through this jungle of content to watch something we might like? How will we discover ‘good’ content?

We believe that the companies that provide answers to this question will be in a position to become the ‘Google’ of video – the starting point of choice for consumers to find the video content they might want to watch. As such, the opportunity facing eVokeTV is not dissimilar to the opportunity facing search companies and online portals in the late nineties as internet text content was poised to explode.

Algorithmic Search vs. Social Media

The great winner of the internet “text discovery” battle (aka search) was arguably Google and its search algorithm. But search algorithms may not be the best solution to the “video discovery” problem. (Google’s own video search efforts seem to have taken a back seat on its web site, and although companies like Truveo, acquired by AOL, have shown that there is a market for algorithmic search, it is quite intuitive that algorithmic search is inherently disadvantaged in finding creative content. How can I search for ‘something cool to watch’?)

We believe that social media – that is, ways to find content based on the implicit or explicit recommendation of others – provides the most natural and efficient way to find creative content. We have all passed on funny video clips to each other, and we have all received a link to a YouTube video from friends. We rely on our social circle of friends to tell us about interesting content. We watch the TV shows recommended by our friends or the pundits and critics. We like to watch the most popular shows, just to see what every one else is excited by, and in the process, we can become hooked. Even YouTube and Google Video use community-based navigation (which allow users to see the most popular clips for example) to help us find interesting content. However, we know, be it only because of the very distributed and ad hoc nature of the internet, that neither YouTube not Google, will be hosting all the best video content.

During the past year or so, we have seen various companies such as del.icio.us and digg experiment successfully with social media methods of content discovery, by allowing user generated content to play a part in the discovery process. We have also seen social networking sites such as myspace create powerful ways for individuals to connect with each other online. We believe that the most successful video discovery websites will use lessons learnt from such experiments to create the most conducive environment for video discovery.

The relevance of Television

We also believe that the best place to start creating a guide to online video content is with the medium which currently hosts the most popular video content – that is, television. As the two worlds of online video and television video converge, and as the great technologies mentioned above allow us to see video on either venue, the best video guides cannot but incorporate television content.

There are several important reasons why television needs to be a critical component of the video discovery process. First, consumers are still watching a considerable amount of television programming – more than 8 hours a day according to Nielsen. Second, much of popular online video content is still directly related to television. For example, Saturday Night Live’s “chronicles of narnia” clip was downloaded more than 5 million times. CNN newscasts and online sports programming appear on both mediums. And many programs, such as Jon Stewart’s Daily Show or Lost, are creating specific online content related to the original TV programming. Third, preferences in television viewing are potentially powerful indicators of preferences for online video content. Many technology enthusiasts are sci-fi fans. Someone who watches the Soccer world cup online may also be interested in the latest clip on YouTube showing soccer’s greatest moments, or for that matter, Nike’s latest funny soccer related advertisement.

Finally, perhaps most importantly, with tens or even hundreds of channels available to many cable and satellite television consumers, finding things to watch on television is almost as hard as finding things to watch on line. There is so much content available, so much of which we are not interested in, that current methods of finding television programming are quite unsatisfactory. The traditional ‘TV grid’, which shows us every program on every channel available is simply too cluttered. There is too much irrelevant content. As such, solving the video discovery problem on the hundreds of television channels, can guide us to solve the discovery problem when we are faced with quasi infinite content on line.

Acting Locally To Affect the Environment Globally

noreply@blogger.com (Salman FF) — Sun, 11 Feb 2007 03:40:00 +0000

Disclosing the Total Carbon Emitted in Producing Consumer Products

What if every consumer product had a label which stated how much carbon had been emitted in producing it? … like food products that have labels disclosing their ingredients. In the same way that I may want to know how much fat I am eating with my diet yogurt, I may also want to know how much carbon went into the environment to make the yogurt. If I am buying a Dell laptop, I want to know how much smoke Dell put up in the air to manufacture it – the direct emissions – and I also want to know the total amount of carbon that was put into the atmosphere to make each of the components Dell bought from each of its suppliers all over the world – the indirect emissions. I really want to know the Total Carbon Emitted (TCEs) in making all the parts in my computer, including the shipping.

By demanding that all products and services disclose the total carbon emitted in producing them, we could be laying the foundation for a real market based ecosystem to control carbon emissions world wide. We would be pushing power away from the government and politicians, towards the consumers and voters, giving individuals incredible leverage to act locally and affect change globally.

Power to the Consumer

Why have so many people bought the hip and hybrid Toyota Prius? Surely, to help conserve energy by using less gas. But also because it is a statement that they care about the environment – a small palatable step we can all take to try and make a difference. The popularity of the Prius shows that consumers do want to make this statement publicly. The problem is that there aren’t that many things consumers can do to make a difference to the environment, yet cost little enough to be doable, while having a large ‘feel good’ factor.

Total Carbon Emitted (TCE) disclosures mean that many more of us – the majority who want to make a statement with a ‘feel good’ factor, without incurring large costs - can make small choices every day that make a difference. We could buy the diet yogurt that took less carbon to produce because of its packaging materials. We could use the overnight mail service that emits less carbon per package delivered. And so on and so forth…

Leave It to the Marketers

Total Carbon Emitted (TCE) Disclosures on products would allow the increasing number of mainstream environmentally conscious consumers to exercise choice and affect the markets. In turn, this allows companies that emit less carbon in manufacturing their products to advertise this fact, and try to offer more differentiated products to this market segment. They would invest in raising awareness, and in educating the market so as to expand their market segment. In other words, they would create marketing programs that try to increase the number of people who buy products based on their Total Carbon Emitted Disclosures – that is, people who are concerned about the environment.

As an aside, imagine this TV ad for example: Black smoke gushes out of a coal fired power plant in China. Newly manufactured Toyota cars roll out of an adjacent building. A voice says that it would take twice the level of emissions to manufacture a Toyota than the new Chevy hybrid (or whatever – I am making this up obviously)… Pan to a scene of peaceful wilderness around a GM plant and a ‘clean’ hybrid Chevy glides by. “It’s not just the gas you consume – it’s also what went into making the car you drive.”

It would be nice to have companies compete on this issue!

Acting Locally to Affect Carbon Emissions Globally

And in the same way that Hollywood and Silicon Valley trend setters started buying Toyota Prius cars, such trend setters may decide to buy other products with lower TCEs, and start to create a trend. TCE’s would allow Gladwell’s market mavens, connectors and salesmen to do their work. And if consumers pick up on this trend and make more and more choices based on TCEs, companies would then start to factor in TCEs in the choices they make, beyond marketing – in building a new manufacturing plant next to an eco-friendly power source for example, or by choosing suppliers that emit less carbon to produce their goods... Given enough momentum, and a little time, some province in China is going to decide that they are going to scrap their next coal fired power plant project and try to cater to manufacturers that address this market segment by building a more eco-friendly power plant, or at least invest in making the coal plant cleaner by using technologies like “carbon capture and sequestration”.

In other words, the chain of events led by consumer choice can have far reaching effects on decisions made all around the world in a way that a globally negotiated agreement like Kyoto never could. The top-down centrally controlled regulations are just not efficient enough. Yet, given an ecosystem of disclosures, information and marketing, consumer’s power to choose can set in motion a chain of events that create a social and business ‘epidemic’, enabling thousands of micro-level decisions to invest in cleaner technologies.

Wake Up and Smell the Carbon

Such a chain of events may seem like pure fantasy, until you think about the extent of the problem. As I previously discovered, over the next few years, the carbon emissions from new coal plants in China will be so much that they would far overwhelm many of the efforts at cutting local emissions in the US. (Another data point is that by 2015, China will be emitting more carbon than the US, roughly doubling its emissions from 2003, while the US's emissions will only grow by 15% during the same period.)

Yet, we (here in US) are the ones importing and consuming many of the products that are made using energy from those coal plants in China. I made a back of the envelope calculation which guesstimated that the carbon emissions associated with all the goods we import into the United States represents around a quarter of ALL carbon emissions within the US! That means that the carbon that was put into the atmosphere to produce all the things we import is roughly equal to all the carbon emitted by ALL transportation in the US.

Now compare the amount of environmental activism regarding cutting emissions on imported goods versus the activity regarding emissions from cars and trucks. May be, because it is difficult to impose global regulations or caps, we have given up on doing anything about it. We can lobby our government to regulate car emissions in the United States, but how can we ask the government of China to regulate the carbon emitted by power plants there? Well, the lesson from Prius is that we don’t have to use regulations and international protocols! Government initiatives may have helped – but they did not create the Prius phenomena. Consumer marketing did.

All (Environmental) Politics is Local

Of course, that doesn’t mean that there is no role for regulations and politicians. What if a state like California passed a law to force every company selling more than, say, $1 billion of goods in the state to disclose the TCE on each product? Not only would such a move gain popularity among the pro-environment residents of the state, it could also set in motion another powerful chain of events. If companies were forced to invest in calculating and disclosing the TCE of their products in one state, it would be very easy for them to disclose it in other states. Once they decide to partially market their products based on TCEs, they can address other ‘pro-environment’ groups all around the world, and not just California. Such a move may make it easier for other states and countries to pass laws requiring TCE disclosures. It would also prompt other companies competing in other markets to disclose TCEs to compete on this ground. The momentum could be significant.

But Can We Measure TCEs?

Of course, skeptics would say that TCEs are difficult, nay impossible to measure. But companies like Goldman Sachs and Virgin, which have stated they want to reduce their emissions, must be calculating their direct emissions already. And various web sites allow you to estimate your own personal carbon emissions and help reduce it to zero. So standard ways of measuring emissions are becoming common place. Obviously, precisely calculating the amount of carbon put into the atmosphere by all of a company’s suppliers all over the world seems a little more complicated. But in the same way that the ‘personal carbon calculators’ are far from precise, the TCE calculations can also be estimated based on rules and standards that can be set up by the companies themselves to begin with, and by self-regulated private sector institutions (with help from organizations like the United Nations and the World Bank) over time.

In fact, the best model to follow is the one which is currently working for our own financial system. Privately funded accounting industry organizations (like the AICPA and the IASB) try to set the standards for measuring and yes, often estimating financials. Even governmental tax rules allow for estimating expenses by creating rules like the dollar expense per mile driven on a car. Why can't the same kinds of rules for estimating TCE’s be instituted with the goal of making them more and more accurate over time?

Financial Accounting rules and regulations have provided a foundation for creating our global financial markets. Governments, at their own peril, have often used regulations to ‘Cap and Trade’ this or that industry or limit this or that investment vehicle. Thankfully, they have never dared to sit down and prescribe, by decree, how much wealth each country is allowed to produce. And yet, these are the kinds of schemes that are being called for to regulate carbon emissions world wide. Effectively, (as per my previous rant), many environmental regulatory schemes give governments and not-for-profit institutions control over how much Power should be consumed (ie how much carbon should be emitted); and they leave consumers with little power to do anything. It would seem more logical for large not-for-profit institutions to regulate disclosures, for consumers to decide what to consume and how much, and for governments to make sure nobody is cheating, and… well they could have one other role...

If You Can Measure It, They Can Tax It…

The problem with purely local carbon emissions taxes is that they create a competitive disadvantage. If California taxes carbon emissions, then manufacturers can get up and go set up shop somewhere else. Some have suggested a ‘synchronized’ global carbon tax to overcome such problems. (A brief discussion from Davos here in part 6). But such a tax is recognized as being too difficult to realistically coordinate among nations. The source of the problem with such tax schemes is that they try to tax the emissions of carbon at the point of production or emission, rather than the point of consumption.

If we can find a standard way to estimate TCEs, a tax on the consumption of TCEs would have none of the issues above. (Such a tax could be like a sales tax, levied when a product is sold to consumers, based on the amount of total amount of carbon emitted worldwide in producing that product.) In fact, even if levied in just one state like California, such a tax could have global implications, re-enforcing the chain of events I described above to affect decisions about clean energy through out the world. Note that this tax could also be made income neutral to the state – meaning that it would be accompanied by tax cuts in other areas. And so, not only would it not hurt production at home, it might spur investments by companies in and out of the state to market ‘cleaner’ products in California.

What Am I Missing?

I am no expert in the environment, or in economics for that matter, but as I have started to read about carbon emissions, I can’t help but think that there must be better market-oriented ways to address the potential problem we all face. TCE disclosure is one way of tackling the issue, with the advantage that it could garner the support of so many different groups that have heretofore been opposed to environmental initiatives for various reasons:

Local industries are not disadvantaged by TCE disclosures because their carbon emissions are disclosed (or taxed) in the same way as those of a manufacturing plant outside of the country. If anything, in the short term, such a scheme would give a large advantage to manufacturing in advanced economies.
For the same reasons, labor unions can also be supportive of TCEs. (Traditionally they have been the losers of proposed local regulations which push manufacturing jobs out.)
Libertarians and free-market ideologues can support environmental regulations which do not directly interfere with market mechanisms. (It would be hard to argue against disclosures.)

I have drunk my own cool-aid and don’t see the downside to this. But I would love to hear where the thinking is flawed.

The Carbon Emitted in Producing the Goods We Import from Abroad

noreply@blogger.com (Salman FF) — Sun, 04 Feb 2007 19:52:00 +0000

Many environmental initiatives focus on controlling emissions at the source – that is, they try to impose limits at the point which carbon is put in the air, whether it is coming from a coal fired power plant or a car’s engine. But as I see it, when we use a product made in China, we also become responsible for the carbon emissions related to its manufacturing – in China. My question is: Is this a significant number? How much carbon was out into the air to manufacture all the other products that we consume here in the United States.

I used 2 different “back of the envelope” calculations yielding similar results – that the carbon emitted in the atmosphere in producing the goods we import in the United States is equivalent to around one quarter of the carbon emitted from ALL domestic activities in the US. As the chart below shows, this means that environmental activists who are worried about carbon emissions from transportation in the US, should be as worried about the carbon emitted from the goods they buy which are “Made in China”.

Here is how I came up with the calculations.

Method A: My back of the envelope

We can figure out the dollar value of all the goods produced in the US (Row 3), and we know the total amount of imports of goods into the US (Row 4). We know the amount of CO2 equivalents emitted to produce those goods (Row 6), so if we assume that it takes as much CO2 emissions to produce goods in the US as outside the US, we can calculate an estimate of how much carbon was used to create those goods. However, I imagine that the US has better environmental standards than some of its major trading partners like China, so one could also assume that this is a pretty conservative estimate.

Method B: My back of the envelope based on some real research found on the net

Looking around the internet, I came across references to a study by Shui Bin and who had calculated the following:

“The United States, because of its trade with Canada and Mexico, was responsible for 92 million metric tons of carbon dioxide in addition to what it emitted within its own borders. That's an amount equivalent to 2% of total U.S. emissions that year… The researchers next turned to trade with China. They looked at the period from 1997 to 2003, posing a hypothetical question: if the United States had manufactured the products it imported from China, how would that have affected each nation's CO2 emissions? Their conclusion: American emissions of CO2 would have been 3% higher in 1997, and 6% higher in 2003, if the United States had been manufacturing products that it imported from China.

Unfortunately, I couldn’t find any data regarding the carbon emissions related to ALL imports, but given that Canada, Mexico and China are the US’s top 3 trading partners and responsible for almost 42% of all imports to the US, I thought one could extrapolate based on the amount of trade they do with the US. The chart below shows radically different results, if one extrapolates from Canada and Mexico rather than from China. But if we assume that the discrepancy is due to the kind of goods we import from those countries, and we further assume that the imports from the 3 nations together are representative of the types of goods we import from all countries, then it would be fair to average the two numbers – leading to an estimate of 28%, close to the average used in my calculations.

Now, I imagine that the fact that the results are so close is more coincidental than anything. These are ‘back of the envelope’ calculations. But nonetheless, given that the total value of goods imported into the US is more than 2/3rds of the goods we produce here, there is little doubt that significant amounts of carbon were put into the atmosphere to produce the goods we use here!

[BTW - I am using carbon here to denote all greeen house gases, or carbon equivalents.]

Thinking about Global Warming: Part III

noreply@blogger.com (Salman FF) — Sat, 03 Feb 2007 03:17:00 +0000

Why should we do anything to limit carbon emissions?

Continuing my loud thinking criticizing the various efforts to limit carbon emissions, here is a follow up on why it might actually make sense to pursue those efforts (like city wide carbon emissions regulations, and Cap and Trade schemes etc), however flawed they may be:

1. Desperation

It is becoming more and more accepted that we (ie humans) are affecting the environment, and creating potentially huge problems for the planet in the future. The nature of the problem, though, makes it very very difficult to do anything very effective about the problem. Critics would say that we might as well do nothing at all! But, it’s almost like we are so desperate for any solution that the ‘perfect’ solution could be the enemy of a ‘good’ or even less than good solution, specially if we learn how to make those solutions better...

2. Education

After all, we can only learn by experimenting. For example, Europe’s ETS led the effort (as discussed previously in Cap and Trade schemes. However ineffective it may have been in the short run, it provided valuable lessons for future schemes.

So what if some companies get some windfall profits, if our reward is to have created the infrastructure to limit carbon emissions in the future, raised the public consciousness about the importance of limiting carbon emissions, and encouraged social and financial investments that could allow us to move slowly towards better solutions in the future!

3. Momentum

It is very difficult to affect major changes in one try. And certainly, doing anything meaningful about carbon emissions, will need some major changes… in our regulations, our behavior, our investments, our taxes, etc etc. So small steps can set an example, and allow others to follow.

By taking a leadership role in cutting carbon emissions, California would hope to spur other states to do the same, or at the very least, raise the consciousness of other states and countries to follow suit. Without the Burlingtons and Californias of the world setting the example, we would all be less aware of the issues around the environment, and have fewer models to build on.

4. Raising Passions

In fact, given how imperfect the current solutions to cutting carbon emissions are, it is quite surprising that such a momentum has gathered any steam at all. I suppose it took Iraq, $70 oil, many local politicians in places like California and Vermont, years of scientific research to overcome obfuscation of facts and theories, and the PR of Vinod Khosla, Richard Branson, Al Gore and others to get some emotional momentum behind the clean technology movement in the US.

How ironic is that: the wooden Gore of 2000 is now the main cheerleader, the market maven and chief salesman carrying the message about our environment!!

Incidentally, I caught a quote from his inspirational film, that I think illustrates the problem of how difficult it has been to raise passions and create active political momentum. Here is Gore towards the end of his film:

“We have the ability to do this. Each one of us is a cause of global warming, but each one of us can make choices to change that... with the things we buy, the electricity we use, the cars we buy... We can make choices to bring our individual carbon emissions to zero. The solutions are in our hands. We just have to have the determination to make them happen. ”

Here he is inspiring his audience to affect change and “to make a difference” – a paragraph worthy of the greatest inspirational speaker to make people moving, to get them to… well, what does he say next? He shows a slide with a list of countries and says:

“Are we going to be left behind as the rest of the world moves forward? All of these nations have ratified Kyoto. There are only two advanced nations in the world that have not ratified Kyoto, and we are one of them.”

So that’s the plan: Inspire the population to do something about the environment by going out and convincing their politicians to ratify the Kyoto treaty and hand over power to all the regulators and politicians of the world to negotiate a global agreement which is flawed in many ways…!!

How uninspiring is that!

If anything, what is incredible to me is the amount of momentum the environmental movement has actually gained despite all the inadequacies in creating efficient solutions to the problem…

That passion, held by more and more people, regarding the need to do something about the environment – that is a real asset!

Of Kyoto, Net Neutrality, Global Capital Flows and Cap and Trades schemes

noreply@blogger.com (Salman FF) — Tue, 30 Jan 2007 04:30:00 +0000

(Thinking about Global Warming: Part II)

In my previous post, I was ranting about the global nature of carbon emissions and how local initiatives to limit carbon emissions and set environmental standards can seem so futile in the grand scheme of things. This means that local carbon emitting regulations abiding by the “Kyoto standards”, like those passed in California, can have limited direct effects on the global environment. (More on the indirect effects in a later post.) To be truly effective, such regulatory measures need to be global. The problem us that, as shown in Kyoto, it is quasi-impossible to impose global regulations limiting carbon emissions.

(Briefly, as background, here is why such a top-down negotiated approach is difficult: Mature economies like the US are moving to services, and emitting relatively less CO2 over time, and fast growing countries like China are poised to emit more and more CO2 as they grow into industrial powerhouses. So it is arguably ‘unfair’ for the ‘developed world’ to impose limits on the emissions of the developing world and thus impede their growth and development. But it would be unfair on the ‘developed world’ to be lax on the ‘developing world’ while restricting their own emissions. Thus the impasse at the negotiating table.)

But even if we could come to a Kyoto-like globally negotiated ‘fair’ amount of carbon each country could emit, the mere notion of some international organization or group of politicians dictating how much carbon each country can be allotted gives my Chicago-sensitized mind the creeps. Here is an analogy to make my point:

Imagine if we allowed an international group of politicians to decide how we should allocate capital (i.e. investment $$) around the world. Say all the investment dollars in the world went to one big pot and the United Nations was allowed to decide how to allocate it to all the countries in the world. Sure you can come up with formulas, and sure you can hope to come to a political solution for allocating the capital. But at the end of the day, you are just going to end up with a terribly inequitable, de-motivating and inefficient system – if you do a great job, the best you can hope for is to become just a little more efficient than the Soviet central planning bureau! :)

The Cap and Trade Schemes at least try to impose some form of ‘market’ mechanism within the carbon industry. And they do this at the cost of generally ignoring the global nature of the environment (because they would have difficulty imposing such a scheme on the Chinas of the world.)

But even within their more limited local scope, Cap and Trade Schemes have proven difficult to implement in practice. The problem with ‘Cap and Trade’ is not in the Trading part – that is the ‘market mechanism’ – it is in the “Cap” part. To-date, the political process has set the emissions caps that are later traded in the market, so the market mechanism is built on a corruptible and non-market foundation. The European Emissions Trading Scheme showed the kinds of problems this root cause can create. Here is a description from The Economist (unfortunately behind a firewall):

Yet even while lauded as a model for others, the [Emissions Trading] scheme is failing at home... For political reasons, the EU left the power of allocation to national governments. As a result, what should have been an exercise in setting rules for a new market became a matter of horsetrading about pollution limits, with powerful companies lobbying for the largest possible allowances.

Last year, governments gave away (ie, did not sell) pollution permits that amounted to more than the pollution companies were actually spewing forth. That risks making the scheme pointless. The European Commission is now reviewing proposals for allocations in 2008-12…

Lax allocations do more than just fail to cut greenhouse gases (bad enough, you might think, given that this is the main point of the scheme). They also damage the market. When it became clear, in April, that most allocations were larger than actual emissions, the price of carbon halved almost overnight. Some volatility is probably inevitable in a new market, but when combined with irresponsible behaviour by governments it hardly encourages people to enter the emissions-trading business.

It gets worse. The plunging price sends a market signal to developing countries that have installed pollution controls partly so that they could sell the resulting “pollution credits” for a nice profit. That no longer looks like a good idea.

Similarly, some countries (Germany, France and Poland) have scattered permits around like confetti while a few (Britain, Ireland and Spain) have been sparing because they want to cut emissions. Companies in the second group are buying permits issued in the first, so the market is transferring resources from places that are using the scheme to curb pollution to those that are not. Brilliant.

The solution around these problems (as advocated by the Economist, as well as the Obama-McCain bills) is to auction the permits, rather than allocate emissions caps to each industry. But even if such bills become law, the risk is that the capping will become distorted as it passes through the political process.

To illustrate the problem, I’ve been thinking about what a Cap and Trade scheme might look like if applied to another industry. If we decided to implement a cap and trade scheme to address internet bandwidth and net neutrality for example, what would it look like? First, we would need to figure out how much bandwidth each company is using today, and we would cap bandwidth usage at those levels. We would limit each company’s future use of internet bandwidth to that amount of traffic. If anyone wanted more bandwidth, they would have to buy it on the ‘market’. Even if we ‘auctioned’ all the rights to the bandwidth, rich cash cow incumbents (like the telcos) could afford it and create a market in the rights to the traffic. We could claim it is a “market based system”, but if a new company wanted to deliver new web based services (say like User Generated Video), they would have to buy the bandwidth rights from the incumbents! Think about what that would do to innovation.

Of course, the analogy is far from perfect. I am trying to draw on extreme example to make a point. My next post will be far more positive.:)

To Be Continued...

Thinking About Global Warming: Part I

noreply@blogger.com (Salman FF) — Mon, 29 Jan 2007 03:45:00 +0000

Acting Locally to Affect the Environment… Locally

I am starting to think through some of the issues around global warming and carbon emissions, and one of the things that intrigues me is the amount of support received by initiatives to limit carbon emissions locally – in a state, or in a city for example. After all, we only have one world, and one atmosphere, and whether I am throwing carbon in it from an organic fruit farm in Napa Valley or a coal plant in Kazakhstan, it’s all ending up in the same place.

In the book Field Notes from a Catastrophe, Elizabeth Kolbert describes the valiant efforts by the city and citizens of Burlington, Vermont to cut their carbon emissions. Then she goes on to say:

Most of the growth in energy usage in the next few decades is due to occur in places like China and India, where supplies of coal far exceed those of oil or natural gas… Over the next 15 years, the size of China's economy is expected to more than double. This projected growth, most of which will be fueled by coal, overwhelms not just all the conservation projects that are currently being undertaken in the United States, but also, any that could be reasonably imagined. ... If every single town and city in the United States were to match the efforts that Burlington has made, the aggregate savings would amount, very roughly to 1.3 billion tons of carbon over the next several decades. Meanwhile, the lifetime emissions just from the new coal plants China is expected to build would amount to some 25 billion tons of carbon. To put this somewhat differently, China's new plants would burn through all of Burlington's savings, past, present and future, in less than two and a half hours.

So much for the sacrifices endured by Burlingtonites to affect global warming.

But does it do any good to try to act locally to set stringent carbon emissions standards?

Of course. But in one way, given that we live in a world with quasi-free trade, one could even argue that enacting local carbon emissions caps could make us worse off. If the Burlingtons of the world restrict carbon emissions, large manufacturers have even less incentive to produce their goods there, and even more so to go to parts of the world that have cheap labor and cheap dirty(!) fuel! As we evolve into a service economy – which should be, by definition, less power intensive – we create the comforting illusion of reducing our own local emissions, while all we could be doing is just pushing manufacturing and power consumption to the parts of the world that have little or no emissions standards.. in effect causing more pollution for each dollar of manufacturing good produced.

To Be Continued…