Wednesday, November 30, 2011

Asia, Agriculture, and Water

You might want to dust off the old atlas in terms of better understanding water resources in Asia.  It is home to many of the world's great rivers and lakes, but its huge population and exploding economic and agricultural demand for water make it the most water-scarce continent on a per capita basis.  The is highlighted and discussed in Water: Asia's New Battleground (2011) by Brahma Chellaney.  He puts Asia's water issues in the following context:

"Water is becoming a precious commodity whose control is at the core of several raging conflicts in Asia.  Asia's water woes have been exacerbated by rapidly expanding economics, surging populations, rising per capita consumption levels, and continuing rural-to-urban migration.  The water crisis now haunting the continent is the bitter fruit of unsustainable practices and a gross mismanagement of basin resources.  And it has been accentuated by the rapid spread of irrigated farming and high-water consuming industries and by a growing middle class that not only uses water-guzzling comforts such as washing machines and dishwashers but it also is eating more meat, which is notoriously water-intensive to produce."

Agriculture has a unique place at the intersection of a rapidly rising middle class and food production.  Chellaney writes the following:

"Almost 74 percent of the total global freshwater withdrawals for agriculture by volume are made in Asia alone.  As a proportion of its own renewable water resources, Asia's yearly agricultural water withdrawals actually aggregate to 81 percent, or at least 10 percentage points higher than the global average.  In comparison, water withdrawals in Asia for industrial purposes account for just 11.4 percent; and for household needs, 7.3 percent.  South Asia, for its part leads the other Asian subregions in terms of water withdrawals for agriculture.  As a general rule, a larger share of water is channeled for agriculture in the developing countries than in the West, while on the whole has temperate climates and longer rainy periods each year.  Hotter Africa's water withdrawals for the agricultural sector as a percentage of total renewable water resources even surpass Asia's.  Asia, however, has the distinction of being the world's irrigation center.  In the developed world, other than Australia and New Zealand, it is industry, not agriculture, that ranks as the leading water consumer.  Water withdrawals for industry aggregate to 55 percent and for agriculture 29 percent in Europe, whereas the figure for North America are 48 percent and 38 percent, respectively."

Tuesday, November 29, 2011

The Megalogue

The word of the week - - "megalogue."  It comes from an interesting book by Steve Stoute - - The Tanning of America: How Hip-Hop Created a Culture that Rewrote the Rules of the New Economy (2011).

"Others have pointed out, and I agree, that marketing must evolve beyond the monologue, to dialogue and to megalogue.  No longer can advertising lecture or dictate to customers; interaction and exchange are vital.  Add to that the social networking media and technology that the millennial have understood since nursery school, it means that marketing to the group conversation - - the megalogue - - must be seamlessly incorporated."

Monday, November 28, 2011

China Invests (Literally) in Main Street

This was just a matter of time - - the China Investment Corporation (CIC), the sovereign wealth fund, plans to investment in the dilapidated infrastructure of developed countries.  Lou Jiwei, chairman and chief executive officer of the CIC, has an article in today's Financial Times - - China can help the west build economic growth.  Jiwei writes the following:

"The narrative of infrastructure development in places such as the US indicates how such investment powers an economy forward.  China's growth story in recent years provides further proof.  Now, infrastructure in Europe and the US badly needs more investment.

Traditionally, Chinese involvement in overseas infrastructure projects has been as a contractor only.  Now, Chinese investors also see a need to invest in, develop and operate projects.  In a sign of this determination, the China Investment Corporation, the sovereign wealth fund, is now keen to team up with fund managers or participate in public-private-partnerships (PPP) in the UK infrastructure sector as an equity investor.

Infrastructure spending is an important way to boost consumption and it also acts as a spur to economic growth.  One need only look at China to see what can be achieved.  Between 1979 and 2007, China committed vast resources to infrastructure development.  In the wake of the 2008 financial crisis, the government introduced a Rmb4,400 billion economic stimulus package, with a large part of the money directed into infrastructure.  As a result, China's annual economic growth rose from 6.8 percent to more than 10 percent form late 2008 to the end of 2009.

Infrastructure is underinvested in European countries and the US.  The British Treasury has estimated that by 2015, Gbp 200 billion will be needed to invest in energy, water transport, digital communications, waste disposal, and other related projects.  Meanwhile, the American Society of Civil Engineers estimated that the US needs to spend at least $2,200 billion on infrastructure repairs or rebuilding.  Free of inflationary pressure that afflicts many emerging economies, the US and Europe should make substantial investment."

Jiwei sums up our deficit driven future probably the best - - "We cannot count on developed countries to deliver a stable economic recovery on their own."

Sunday, November 27, 2011

Science and Project Runway

This graphic is interesting - - gets at the connection between Albert Einstein and Tim Gunn.  The graph is from the current issue of Scientific American (The Links We Love - Science aficionados have odd and surprising interests).  At the request of the magazine, the chief scientist at bitly, which shortens URls for Web users, examined 600 science Web page addresses sent to the company's servers on August 23 and 24.  Then she tracked 6,000 pages people visited next and mapped the connections.

Physics and computer science should not be a surprise - - but fashion is interesting.

Saturday, November 26, 2011

Unemployment by Engineering Major

Interesting - - unemployment by college major.  Which has higher unemployment, biomedical engineering or civil engineering?

Friday, November 25, 2011

Cemex Shift

I am probably not alone - - corporate online computer aided collaboration is typically dreadful.  From Notes to Microsoft's Office Communicator, you enter a a world that has promised much since 1972 (see Corporate networks are starting to bear fruit by Andrew Hill in the November 22, 2011 Financial Times), yet delivered relatively little.  Historically the field of computer aided collaboration  has been much about the technology that networks an organization  and far less on how we understand how organizations actually work (Does anyone actually listen to the staff on what they want to use it for?).  Knowledge management - - the stuff in my head, the stuff in my Moleskine, the stuff in my laptop - - has huge upside practicality for any organization.  The issue has always been the process of integration and application in the context of knowledge management.

Facebook has been a tremendous roadmap for the corporate world - - it has allowed people to see and utilize in detail the nuts and bolts of social collaboration.  Companies like Cemex have seen the future and power of computer aided collaboration with their Cemex Shift.  Cross-border and cross-functional collaboration - - anytime you have 900 people talking online about brown clinker (a cement ingredient) you are entering the socially networked world of the nitty-gritty of knowledge transfer and management.

It is a fair point to remind people that freewheeling ideas from online collaboration still need plans and execution - - it is also a fairer point to remember that the science of business plans starts with the art of an idea.

Wednesday, November 23, 2011

The Process versus the Solution

Roger Martin is the dean of the University of Toronto's Rotman School of Management.  His lessons on problem solving and decision making should be read by all engineers.  In a world of multidisciplinary problems - - his ideas on "integrative thinking" are the foundation for how we can think about ideas and solutions.  Engineers should understand that good decision making is not always about making tough choices, but refusing to choose when no good option presents itself.  Sometimes it is about utilizing the tensions of the decision making process created by different ideas to generate even better solutions.  The future in the context of how we train and educate engineers might just be less on solution to problems and more on the process of arriving at a solution.

Check out the Rotman Desautels Centre for Integrative Thinking.

Tuesday, November 22, 2011

Shut Up and Listen

Innovation is all about the customer.  Michael Bierut is a partner at Pentagram and co-founder of the Design Observer.  For many big organizations, the challenge is how to create a culture that encourages customer-led innovation.  Bierut has a simple rule regarding innovation - -

"Shut up and listen"

Monday, November 21, 2011


MassMotion is a software package that takes 3D computer models of buildings and fills them with "agents" - - virtual stick figures that represent people.  The point is to provide architects and engineers with an analytical tool to better understand crowds as they move through subway stations, concert halls, and office buildings.

Developed by Arup alum Erin Morrow, MassMotion was born on a project for New York's Fulton Street Transit Center.

Sunday, November 20, 2011

The Georgetown Climate Center's Adaption Clearinghouse

The Georgetown Climate Center's Adaption Clearinghouse is an excellent source for information on climate change.  Not the endless discussions and debates on whether climate change is real - - it is a source dedicated to what cities, states, and water authorities are getting serious about - - adapting.  At the local level, climate change is viewed from a different lens than the national and international debates.  More rain and more drought has produced less local ideology and a more thoughtful discussion on changing codes and standards with the goal of making public infrastructure more resilient (get use to this word) to changing weather from global climate change. 

Engineering needs to get on board with the notion of adaptability and resilience.  More action seems warranted because science is painting an increasingly certain picture of a climate being altered by human actions.  Models predict that as the earth's temperature rises, heat and drought will increase in bands across the American Southwest.  At the other end of the spectrum is the understanding that for each one degree Celsius rise in temperature, the atmosphere can hold 7% more moisture.  This means 2 to 3 percent more rain in general but 6 to 7 percent more extreme rainfall events.

Engineers will have to help cities and communities find resilience.  Case studies show that it is far cheaper for a locality to spend money in the present to become more resilient than to pay for damages from weather disasters in the future.  The shopping mall owner that chips in for a community's stormwater system upgrades, for instance, earns local goodwill, reduces the property's risk of damage from flooding and boosts the chances that people will still be able to shop when bad weather strikes. 

Friday, November 18, 2011

Soft Infrastructure

The past 500 or so years has seen the development and expansion of our "hard" global public infrastructure.  These are the physical elements that show up in the pictures that define our urban landscape.  The streets that aid in moving people, the natural gas line that heats our homes, the wastewater collection main that keeps the city clean and healthy - - the "hard" parts of our public infrastructure that have been a remarkable success.

Clearly the future will have "hard" components - - we will not stop designing and building bridges and water treatment plants.  But our notion of public infrastructure for the 21st century will be a blend of the "hard" physical infrastructure and the "soft" infrastructure.

"Soft" infrastructure will be the combined utilization of information architecture, informatics, analytics, and instrumentation.  The goal of 21st "soft" infrastructure is to better connect people with information that they can then use to make choices that reduce waste and promote sustainability.  It will be about taking the non-interesting circles of our "hard" infrastructure and providing connectedness that allows for a more informed citizenry and more robust decision-making public institutions.

Several themes will be important as "soft" blends with the "hard".  One is the idea of open information.  Open information is important - - it increases the efficiency of resource use and it makes cities and urban environments better to live in.  At its most fundamental level, sustainability is driven by behavioral change.  Technology alone cannot stop energy waste.  Only people can do that - - where change starts with better information.

The second theme is that "soft" means real time - - sensors located on existing infrastructure that can monitor critical parameters and report patterns in real time.  It is about an infrastructure experience that is richer, more efficient, and more personalized.  It is about making non-intersecting circles connect - - information feedback loops that connect systems to systems and systems to people.  "Soft" means providing information in real time that enables better decisions - - in a more sustainable world this means providing information that encourages smart behavioral change.

The final theme is a an understanding that "hard" and "soft" exist together.  The many-sidedness of "hard" and "soft" need to co-exist so as to provide the opportunity for a public infrastructure unifying purpose.  The hardness of our complex physical infrastructure should not breed mystery.  Softening some of that hardness with better information produces a public environment of shared context and perspectives.

Thursday, November 17, 2011

Launched in 2007, FixMyStreet is a web service to help people report, view, or discuss local problems with their local council by simply locating them on a map (a link is provided for London).  Built by MySociety, a not-for-profit company in conjunction with The Young Foundation.  FixMyStreet smartly routes reports of things that are broken or dumped, or need fixing, cleaning or clearing, directly to the relevant council in the UK.

The Age of Participation meets the Age of Transparency on a website in the context of a pothole - - both participation and transparency make for better democracy and more effective governess.

Wednesday, November 16, 2011

Word Lens

Seeing the invisible is possible with the new field of augmented-reality apps.  See Word Lens below - - you point your iPhone at a sign in Spanish and the app "magically" replaces the original test with an English translation, right there in the video image in real time.

Imagine a world where you can point your iPhone at an intersection and all the underground utilities show up as lines in the image.  My prediction - - this will be possible somewhere in the world by the end of the decade.

Tuesday, November 15, 2011

Shades of Green

We appear to be marching toward greater greenness in spite of our global economic problems and a lack of global regulations.  The Schumpeter column in the November 12, 2011 Economist (Why firms go green) highlighted the trends outlined in a report by Ernst & Young.  The results from 300 top managers of big global firms quizzed by Ernst & Young included:
  • 44% stated that spending on sustainability had increased since the 2008 financial crises.
  • Even without carbon regulation - - some sorts of green investment make commercial sense.
  • Improved energy efficiency and waste management are seen as having the darkest shade of green.
  • The falling price of renewable energy is starting to offer firms another way to cut costs.
  • Firms like Coca-Cola, Unilever, Nestle, and PepsiCo have several things in common - - a focus on expanding in the developing world and the need for lots of water.  Water conservation has shades of green.
Gavin Neath is Unilever's head of sustainability and he probably summarizes the goal of greening in the face of tough global economic times the best:

"We know what the future looks like.  We know water will be very scarce, we know that energy prices will be much higher, he know sanitation will be ghastly in increasingly crowded urban areas."

Firms like Unilever are starting to put their money where their mouth is.

Monday, November 14, 2011

The Smart Solution for Cities

Interesting report from Arup - - The Smart Solution for Cities.  The report highlights a critical strategic issue in the continued development of sustainable cities.

"Information and communications technologies (ICT) can be deployed to create new, intelligent ways of making our urban centres more resource efficient and reduce their carbon footprint.

Information has a strategic role to play in reducing the carbon footprint of cities.  Amalgamating information on city systems means it can be deployed, real-time, to city leaders, allowing them to make decisions about the most effective use of city resources swiftly - - and, ultimately, feed those decisions back to the components of the city: transport providers, energy companies, building owners.  Also - - and this is often overlooked - - information can be provided to the city's end users, and through awareness the behaviour change necessary to achieve resource efficiency can be achieved."

Sunday, November 13, 2011

Innovation Hurts

Innovation hurts and it is also subject to constant imitation.  Author Michael Lewis (Moneyball) talks about this and more in an interview he and Billy Beane (Oakland A's general manager) had with the Financial Times this weekend (Let's play moneyball).  Lewis makes the following point in the interview:

"Innovation hurts.  After Beane began using numbers to find players, the A's scouts lost their lifelong purpose.  In the movie, one of them protests to Pitt: "You are discarding what scouts have done for 150 years."  That was exactly right.  Similar fates have been befalling all sorts of lesser-educated American men for years, though the process is more noticeable now than it was in 2003 when Moneyball first appeared.  The book, Lewis agrees, is partly "about the intellecturalisation of a previously not very intellectual job.  This has happened in other spheres of American life.  I think the reason I saw the story so quickly is, this is exactly what happened on Wall Street while I was there."

Wall Street in the early 1980s saw the collision of the old school network with the PhD rocket scientist - - with the advantage overtime going to the rocket scientists because of the enormous complexity of financial products.

Innovation and imitation also intersect in the Moneyball story.  Why no recent World Series for the A's?  The main reason is people and organizations catch-on and catch-up.  The New York Yankees recently hired 21 statisticians.  Innovation as a success variable with a discrete point in time is always short-lived - - the edge will never last.  

Saturday, November 12, 2011

We are in the age of participation

The observation comes from Secretary of State Clintion.  She continued the idea with ". . . and the challenge is to figure out how to be responsive, to help catalyze, unleash, channel the kind of participatory eagerness that is there."

Dilbert's Scott Adams seems up to the task (The Wall Street Journal, November 5, 2011 - What If Government Were More Like an iPod?).  Adams is thinking in terms of a fourth branch of government - - The Interface Branch.  The branch would have the mission of building and maintaining a friendly user interface for citizens to management their government.

Adams wants one website to go to and see the best arguments for and against every issue with links to support or refute every factual claim.  Arguments would be graded for context, accuracy, and logic (Adams thinks this is important because we are not good at sorting arguments - - we have trouble knowing the difference between science and magic.).

Adams wants online surveys - - with the caveat that you must pass an online intelligence test before voting.  Participation starts with smart people who have done their homework.  Adams is sure Thomas Jefferson would love this Internet based government.  Adams had the following comment:

"Imagine showing Jefferson the Internet.  I think he'd immediately launch a start-up, design three apps and purpose a new form of government that leverages social networks, all before lunch."

What about the citizens who don't have access to the Internet?  Adams would change the Constitution to make Internet access a basic right.


Nike has the Joe Paterno Child Development Center on their corporate campus.  

Friday, November 11, 2011

Risk Management Solutions

Risk Management Solutions is a California-based catastrophic risk modeling consulting firm - - earthquakes, hurricanes, terrorism, infectious diseases, etc.  As the "Age of Surprise" rams into the "Era of Adapting Quickly", firms like Risk Management Solutions put the numbers behind risk.  Typically risk losses result from three components - - hazard occurrence, elements of risk, and vulnerability.  Risk modeling is uber-multidisciplinary - - everything from GIS, statistical analysis, engineering, construction, safety, economics, and computer science to sociology.

It is also a little history.  Risk Management Solutions Chief Research Officer, Robert Mur-Wood, was recently quoted in the Financial Times (November 9, 2011, Progress in understanding frequency of earthquakes) regarding earthquakes.  Mur-Wood pointed out that between 1950 and 1965, there were seven earthquakes worldwide greater than magnitude 8.5, three of which were bigger than magnitude 9.  There were no such earthquakes in the 25 years before 1950, nor for almost 40 years after 1965.  Since 2004, there have been five magnitude 8.5 earthquakes or bigger and two at or above magnitude.  This "clustering in time" relates to the episodic global physical process triggering these episodes, but the precise mechanism remains unknown.

Why is risk modeling becoming increasingly important?  The same paper (The key is to ensure you have back-up) points this out:

"What is more, according to natural hazard experts, as companies increasingly look to invest in Asia and set up more industrial sites in or near main growth markets of the world, they are often driven towards building in some of the areas most exposed to flooding or seismic activity, usually of a lack of choice.

In the near term, the biggest concern about this is the chance of further tremors hitting the country [Japan].  Earthquake prediction is a notoriously uncertain science, but seismologist are broadly agreed that one result of the Tohoku quake in March has been an increase in the stress levels on faults both north and to the south of Tokyo.

Since March, reinsurance rates for earthquake cover in Japan have shot up by 50 per cent or more.  However, for some, even this is not enough to compensate for the heightened risk."

Thursday, November 10, 2011

Who taught Jobs marketing?

The book of the year so far has to be Isaascon's Steve Jobs.  Each page has something interesting and enlightening.  The Jobs story is well known - - but not all of it.

One new story is the one relating to Mike Markkula.  Markkula was a marketing expert that early venture capitalists recommended to Jobs.  At the time (late 1970s during the Apple II days), Markkula was only thirty-three and retired after working at Fairchild and Intel.  He taught Jobs marketing and sales - - he emphasized that you should never start a company with the goal of getting rich.  Your goal should be making something you believe in and making a company that will last.

Markkula wrote his principles in a one-page paper titled "The Apple Marketing Philosophy" that stressed three points.  The points were:
  1. Empathy - - an intimate connection with the feelings of the customer.  "We will truly understand their needs better than any other company."
  2. Focus - - "In order to do a good job of those things that we decide to do, we must eliminate all of the unimportant opportunities."
  3. Impute - - people form an opinion about a company or product based on the signals that it conveys.  "People DO judge a book by its cover."  "We may have the best products, the highest quality, the most useful software etc.; if we present them in a slipshod manner, they will be perceived as slipshod; if we present them is a creative manner, professional manner, we will impute the desired qualities."

Wednesday, November 9, 2011

We are investing in our national infrastructure

Pot holes, crumbling bridges, inadequate wastewater treatment - - the press reports would indicate our national infrastructure is falling apart.  Passenger trains between Chicago and New York run barely faster than they did in 1950.  Our aging infrastructure combined with a lack of political will has produced a bad situation in the context of our national competitiveness.  Or has it?

The Wall Street crowd seems to have jumped on the infrastructure investment bandwagon.  Something call "Spread Networks" constructed a superfast one-inch diameter fiber optics cable between Chicago and New York.  The 825-mile cable was laid in a direct path between Chicago's South Loop to a building across the street from Nasdaq's servers in Carteret, New Jersey (connecting the Chicago Mercantile Exchange with the New York Stock Exchange).  The line cost $300 million and replaced an existing line running 925-miles.  Probably an incredible feat of engineering.

Next time you hit a pot hole remember what the $300 million one-inch diameter line was all about.  Data transmission on the old line was 13.3 milliseconds.  The new line has a transmission rate of three milliseconds - - which is three-one thousands of a second.  Speed matters in a world of global financial markets.  Speed is money.  Speed is power.  Speed means that when picking up the gold coins off the trading floor - - the faster you are the more gold coins you can collect.

As you hit the next pot hole that interrupts your conversation on the latest iPhone - - ask yourself why all the dazzling technological change, but no progress.

Tuesday, November 8, 2011

From ownership society to a nation of renters

A crucial sector of the world's biggest economy remains resistant to revival - - the U.S. housing market.  The Financial Times covered the issue today in Streets Behind.  Some of the numbers and trends are truly troubling.  Consider the following:
  • Some 20% of homeowners are either unable or unwilling to make their mortgage payments - - the remaining 80% in turned have seen their prices driven lower.  Pareto is probably at work - - 80% of the problem is in 20% of the system.  And 51% of us need to agree on a mechanism to fix 20% of a system or 100% basically suffer the consequences.
  • In 2004, home ownership was at a record 69.4% - - stripping out delinquent borrowers (who are already basically renters) - - the current ownership rate might be in the 60% range.
  • The actual ownership rate could drop to 61% in the next three years - - the rate has not been below 62% since 1960.  In the context of home ownership - - we are moving toward rates seen 50 years ago.  Your iPad is about tomorrow - - while the roof over your head is increasingly about yesterday.
  • Count on another 10.4 million borrowers defaulting in the coming years.
The beginning of the rentership society is upon us.  Charles Dickens turns 200 in February 2012 - - it might be a good time to brush up on the classics by the master of the intersection of economics and social structure.

Monday, November 7, 2011


Which in Brazil means "below the salt" - - the deep Cretaceous salts which trap oil in rocks off Brazil's coast.  The November 5, 2011 issue of The Economist covers Brazil's oil growth in the context of the pre-sal - - Filling up the future.

Key points in the article are outlined below:
  • Total recoverable pre-sal is estimated at 50 billion barrels (all in the waters of one country).
  • The probability of a drilling success in the pre-sal is estimated at 87% - - the world average is 20% to 25%.
  • Petrobras is currently producing 100,000 barrels a day in the pre-sal.
  • By 2020, Petrobras expects 4.9 million barrels a day - - 40% from pre-sal.  This would push Brazil into the top five of oil producers.
  • The pre-sal should give Petrobras the know-how to become the world leader in "ultra-deep drilling."
  • Apollo cost the U.S. less than $200 billion in today's dollar - - pre-sal development over a 10-year period will cost a trillion dollars.
  • Petrobras is currently engaged in 700 projects costing more than $25 million each.
  • Look for the oil service industry to establish high-tech and service centers close to the pre-sal area.

Sunday, November 6, 2011

Ten Laws of Simplicity

I am currently reading Walter Isaacson's Steve Jobs (2011).  Jobs interest in Eastern spirituality, especially Hinduism and Zen Buddhism, provides for an interesting view of his design philosophy.  Simplicity was and is a cornerstone of Job's (and thus Apple's) idea of the human and machine interface.  Look at the iPod - - a game-changer across numerous industries, it was so easy to operate it didn't need an operator's manual.  How many watches can make that claim?

A good companion book to Isaacson's is The Laws of Simplicity (2006) by John Maeda.  Consider his ten laws of simplicity:
  1. Reduce - - The simplest way to achieve simplicity is through thoughtful reduction.
  2. Organize - - Organization makes a system of many appear fewer.
  3. Time - - Savings in time feels like simplicity.
  4. Learn - - Knowledge makes everything simpler.
  5. Differences - - Simplicity and complexity need each other.
  6. Context - - What lies in the periphery of simplicity is definitely not peripheral.
  7. Emotion - - More emotions are better than less.
  8. Trust - - In simplicity we trust (Jobs would probably love this one).
  9. Failure - - Some things can never be make simple.
  10. The One - - Simplicity is about subtracting the obvious, and adding the meaningful.

Saturday, November 5, 2011

A Single Everything

Rahmi Koc is the patriarch of the $12 billion Koc Holding - - one of Turkey's top industrialist.  Charlie Rose recently ask Koc his prediction on the euro.  This was his response:

"Europe has no chance but to make the euro survive - - I can't even imagine or think of restructure in my mind how it would be if they went back to their original currencies.  But when you have a single currency, you have to have a single everything.  If you don't have a single flag, single foreign policy, single economic policy, single monetary policy, it's very difficult to have a single currency because the countries that are not economically in good shape cannot devalue."

Thursday, November 3, 2011

Quote of the Week

From the November 3, 2001 Financial Times - - special supplement on US Innovative Lawyers 2011.  From Tom Reid of Davis Polk & Wardwell - -

"Every innovative business has to be focused on how to deliver yesterday's solution for less"

Innovation in the context of firms with a business model that exploits the past versus explores the future probably should remember the words of Mr. Reid.  Companies like Apple, where the business model is focused on exploration, can reframe the statement - - ". . . focused on how to deliver tommorrow's solutions for more."

Wednesday, November 2, 2011

Nest Labs

What happens when the brains of Apple tackle the thermostat in your hallway?  You get something like Nest Labs.  Founded by ex-Apple executives who led iPod and iPhone development (New York Times, October 25, 2011 - Ex-Apple Leaders Push the Humble Thermostat Into the Digital Age by Steve Lohr).  This is the first "learning" thermostat for the iPhone generation.  Consider the points in the article:
  • The thermostat will run $249 and shipments will begin this month.
  • Style and ease of use (which describes every Apple product) are key elements in the design.
  • Technology - - such as motion-tracking sensors that detect whether people are present and adjust room temperatures accordingly.
  • Do people buy a thermostat because is is cool looking?  Cool looking and three times the cost of the one I just installed in my bedroom.  Since VC Kleiner Perkins Caufield & Byers, Google Ventures, Lightspeed Venture Partners, Intertrust, Shasta Ventures, and Generation Investment Management are all backing Nest - - smart people are thinking yes.
  • Homes like mine account for more than 10% of the total energy consumption in the United States - - with about half of the 10% going into heating and cooling.
  • Each degree cooler a house is kept in a heating season, or warmer in a cooling season - - translates to a 5% energy savings.  So shifting consumption patterns by four degrees can potentially mean a savings of 20%.  Which means, an annual savings of $200 to $300 per year and fewer new power plants.
  • The argument is that "smart" thermostats pay for themselves and "smarter" thermostats pay for themselves even quicker.  If a person is out of town each Monday on business, the Nest sensors detect that and switch to an "auto away" setting for lower energy use.  Nest has a sizable team of specialists in the branch of artificial intelligence can machine learning, including Yoky Matsuoka, who came from Google and whose work won a MacArthur Foundation award.
  • An estimated 10 million thermostats a year are sold as replacements and in remodeling.

Tuesday, November 1, 2011

Infrastructure Investment and Finance

The October 29. 2011 issue of The Economist had an interesting academic appointments advertisement that highlights a potential new direction for engineering and construction.  The Barlett School of Construction and Project Management of London is looking for a Chair in Infrastructure Investment and Finance.  The Barlett program looks very traditional - - courses and research in strategic management of construction firms, project management, construction economics, enterprise management, network rail management, etc.  But the design and construction industries are rapidity changing, especially those in the public sector - - and especially those in the developed world.  The reality should be very clear.  One word can define this clearness - - austerity (just remember the synonyms - - severe, strict, harsh, dour, grim, unfriendly, self-denying, etc.).  The age of rapidly crumpling infrastructure in the developed worlds meets the reality of a rapidly aging population and escalating health care costs.  The public sector bank account is or will be drained - - for civilization to march forward, something must fill the void.  That something will be strong demand for infrastructure improvements combined with the global capital markets. 

The future of public infrastructure will have a path that intersects the financial resources of the private sector.  Engineering and engineers in the near future will need to be much more comfortable with the full depth of the the word "austerity" - - combined with a firm understanding of the new realities embedded in infrastructure investment and finance.  After you take construction methods and project management - - global infrastructure investment might be a great elective.