Venture Capitalists and Business Managers Unite!

I have spotted a trend among venture capitalists and business managers. During the course of a few weeks several seem to have adopted the idea that nations need to develop strategies for innovation and technology development. I have previously mentioned the article by CEO of General Electric, Jeff Immelt, and venture capitalist John Doerr in The Washington Post:

Last week the Swedish business daily Dagens Industri (DI) held an article in a similar vein by the head of the Wallenberg finance family, the largest owner of the investment company Investor, which holds controlling positions in several large groups and companies, such as SEB (a major Swedish based bank), Ericsson, ABB, Scania, Atlas Copco and Electrolux. Mr. Wallenberg writes his article as the chairman of a development group, lead by the Swedish Royal Institute for Engineering Sciences (IVA), which has started to analyze the need of a Swedish strategy for technology development.

Incidentally, this is what my book Global Energy Transformation is all about. I discuss the need of national strategies for the development of new technology that will reduce the dependence on energy, and particularly fossil fuels. There now seems to be a trend among high level business people to support the general idea that nations need strategies for innovation. How interesting!!!

The book:

Sunday, September 13, 2009 by Mats Larsson

“We are well prepared!”

At the beginning of the Second World War, the Swedish Prime Minister, Per-Albin Hansson, re-assuringly stated that “Sweden is well prepared for a war”. When the forces of nazi Germany took Denmark, the Swedish army, at night, drove jeeps with heavy logs along the coastal road which the Germans could view from Denmark. The jeeps had their lights on while driving one direction and then they drove back with their lights turned off. Then they went back the same way once more with the lights on.

This was to make the Germans believe that it would be much more difficult and costly to try to conquer Sweden than it had been to besiege Denmark. Nowadays, people in Sweden, sometimes when they hear a big lie coming from officials, say okay “We are well prepared!”. A funny story tells of the Prime Minister of Denmark calling his counterpart in Sweden, asking to borrow tanks, because the Germans were crossing the border: “OK, no problem, do you want one, two or all three of them?”

We are in a similar situation now, globally, in which politicians and business people in high positions, environmentalists, journalists, and engineers try to re-assure us that we are well prepared to take on the challenge of transforming energy systems. As soon as energy prices increase to a level high enough, there will be a wave of investments that will clear away our dependence on fossil fuels.

Similar to Swedes and Germans at the beginning of the war, most of us are happy to go along with this, paying little attention to what it will really take in terms of investment, technology development and large scale change of systems and habits to reduce our dependence on oil.

“We are well prepared!” will hardly become a joke in the future. This is because the enemy back then were human beings who could be scared by a false statement. The enemy in the energy transformation will be technology and large scale systems. There will be a need for us all to develop and implement new techynology, and change behavior and other patterns in our lives. We can fool ourselves for some more time, but then we will have to face the facts, and the challenge will become tougher as we procrastinate, since we will have less time at our disposal for the change.

Monday, September 07, 2009 by Mats Larsson

The speed of transportation

There is an alternative to reducing the volume of transportation. We may reduce the necessary speed of transportation, at least in the case of goods transportation.

By reducing the necessary speed of transportation we could move more goods from air and truck to railway and ship, which would reduce the energy needed for transportation.

Transportation is part of industrial and trade systems, and in order to transform transportation we will need to expand the system of transportation to the systems that create the need for transportation.

Sunday, September 06, 2009 by Mats Larsson

An energy efficient transportation system

The energy efficient solutions of the future need to be built on the basis of an overall picture of how energy efficiency will or can be created in the total system of society.

Both large companies and governments need to build scenarios. Companies need to build scenarios in order to position themselves, the technologies and products that they want to develop and launch. They need to build a foundation for their technologies based on an expectation of future needs, and marketing of future technologies has to start now, as it did in the early part of the Apollo program. Governments need to build scenarios in order to be able to manage the overall development process, invest in relevant research and development activities, and implement incentive systems, plans and take other measures to facilitate development in the direction that each nation finds attractive and realistic.

As a basis for scenarios, there has to be overall assumptions about the volumes of goods and people that will need to be transported in the production systems and for leisure in the future. There hass to be assumptions about the role of the cities, their level of self-sufficiency and the role of the countryside, and the location of industry, and administrative functions. The assumption put forward in Global Energy Transformation is that many things will need to change rather dramatically, because we will not have enough energy to maintain current systems in the form that we see them at present. This is due to the global peak in oil production (Peak Oil) that is imminent.

Based on a few overall scenarios, we can model the transportation systems of the future. We need systems for intercontinental transportation of goods and people, based on energy efficient means of transportation, and we need similar systems for medium range (within countries and continents) and local and regional transportation. Again, we need to model these systems on estimates of future transportation volumes.

Once we have developed realistic visions of future logistics, we can discuss the different systems. Clearly, there are differences between countries that force us to use different solutions. In the United States there is a need for connections between a number of very large metropolitan areas, with relatively little people in-between. In Europe, the population is more evenly spread out, but there are significant metropolitan areas that need efficient connections between them. In a country like Sweden, we have a few medium sized centers, with a number of smaller nodes between them.

We know that in order to maintain systems that are similar to the ones that we have, we will have to develop very large amounts of renewable energy very rapidly. We can start to calculate the amounts and the volumes of raw materials or solar energy that we will need. We may be able to reduce the amount of energy needed, if we aim to change production and transportation structures. We can calculate the energy need within different future systems, based on different assumptions of the future.

One thing we can also be certain of is that a future situation will appear, regardless of what we do, but in order to create a future that we want, we need to manage the process of transformation. If we want to create new transportation systems, we cannot only focus on transportation technology and systems, we need to understand the context within which transportation functions, and model transportation solutions based on expected changes in the overall system.

This argument is developed in more detail in “Global Energy Transformation”:

Sunday, August 30, 2009 by Mats Larsson

Embracing Change

In The Washington Post, op-ed columnist Michael Kinsley writes that Americans are favorable to change in theory, but they don’t like it in practice.

This is probably true of all nations in the world and of all groups of professionals. Change management experts are among the worst in refusing to change themselves. This is the reason why we argue in favor of change management. Change management experts, more than any other group in society, understand that large scale change, in ways that we do not entirely embrace as individuals, will only come about if we start a large scale change program. We are really not very good at changing things on our own.

Friday, August 28, 2009 by Mats Larsson

Investment Wave

The large scale transformation of energy systems that will become necessary in the near future will cause a number of large investment waves in energy efficient, sustainable, technology.

It is at present not clear which technologies, raw materials or system solutions that will become favored and it is highly probable that not all possible bio-fuels will be used on a large scale. A few will be selected over others for a number of different reasons. Political decisions and projects will become necessary, in combination with market based activities.

At present companies that want to benefit from the upcoming investment waves need to position themselves and advocate and “market” their preferred technology solutions to decision makers at different levels. In addition to this, companies need to, in different ways, position themselves and their technologies as the most promising alternatives towards future customers and start to form coalitions of development partners that possess different competencies that will become necessary in the development processes.

This will require well devised strategies on the part of technology and systems suppliers, vehicle manufacturers, fuel and raw materials companies, etc.

My book “Global Energy Transformation” provides a background for the development of strategies in different energy related sectors:

Wednesday, August 26, 2009 by Mats Larsson

A process of learning for society

As a society we are now in a situation that we have never been in before. We need to learn how to solve a completely new set of problems, that will affect global economic growth and prosperity and national economies, in the future. The United States, for example, is facing a large budget deficit. At the same time, oil production is about to reach its peak and we do not have renewable fuels ready to replace oil.

Different analysts provide different pieces to the jig-saw puzzle of what we need to do. There is now a need for President Obama to create a policy that works from these bits and pieces. The leaders of other countries are facing similar challenges. Some of the pieces I have commented in earlier postings:

– Dr. Fatih Birol of the International Energy Agency warns of an impending shortage of oil as we draw closer to the global peak in production.

– CEO of General Electric, Jeff Immelt, and Venture capitalist John Doerr argue that the US government needs to become involved in the development of sustainable technologies so that the United States can take a lead in these areas.

– The CEO of Volvo, Leif Johansson, argues that high level political agreements will become necessary to agree on the bio-fuels that are necessary to reduce emissions in the future.

– Venture capitalist Warren Buffet argued in The New York Times that the United States is running up a budget deficit of historically unprecedented proportions, and that this needs to be balanced.

– The economics Professor and Nobel laureate James Buchanan visited Sweden and argued that a stable currency will become necessary in order to create and sustain future economic stability. Professor Buchanan argues in favor of a raw materials or gold standard for currencies, that should replace the floating currencies of the existing system.

These are all very relevant and important arguments. The different aspects of oil, renewable energy, economic stability and currency systems need to become molded into working polical programs and policies for the future. As a society, we need to learn how to solve this type of problem, that we have never seen in this way before.

How about getting the above gentlemen, and some more who cover other relevant aspects of these issues, into the same room to discuss the best ways to tackle them? How about starting an Energy and Economics Task Group, similar to the Space Task Group of 45 people that was formed by President Eisenhower in 1958? In the process of organizational learning, on the level of society and companies, the creation of relevant organizational structures and institutions has to be a consequence of the learning process.

These arguments are put into context in my book Global Energy Transformation, which can be found by following this link:

Friday, August 21, 2009 by Mats Larsson

Buffet on “the greenback effect”

Warren Buffet, the famous investor and fund manager, wrote an op-ed column in the New York Times today:

In this he analyzes the debt situation of the United States with the global climatic consequences of pollution. Buffet argues that the budget deficit of the United States in 2009 has to be dealt with, and that there are a few different ways to do this.

Buffet’s analysis is similar to the one that I provide in Global Energy Transformation of the different options to deal with the need to transform large scale energy systems. Buffet emphasizes the large scale challenge that lies in front of The Obama Administration to balance the books of the United States.

The need to transform energy systems on a large scale adds another large scale endeavor, that could either be seen as a burden or as an opportunity. Realistically, there will be some of both of these, and different nations need to analyze how they can handle the transformation.

Unfortunately, it is not realistic that the market forces will be able to handle all aspects of the transformation. Government investments in technology development and implementation will become necessary. In an earlier column by CEO of General Electric, Jeff Immelt, and venture capitalist John Doerr, the need for government involvement was emphasized, for the United States to be able to take a leading position in green technology areas.

The financial and fiscal challenge of the next few years needs to be analyzed in combination with the need to develop and implement sustainable technologies. There is no other option than to take a complete view of the challenges, nation by nation.

Wednesday, August 19, 2009 by Mats Larsson

Page 2 of 10