Author Archives: Kevin L

Market for green premium

The energy transition and decentralisation of energy had quietly started shifting the capital markets since close to a decade ago. While the traditional energy players continue to compare the cost of green energy against the cost of their own fossil fuel based energy, they found no reason to diversify their business. Even in face of some subsidy, or some Feed-in-Tariffs, they were reluctant to invest.

There was no scale, and they thought they were going to face more competition and erosion of any green premiums they could secure. But then the capital holders started taking notice. The projects were simple enough to invest into. Solar farms had minimal requirements from an operational perspective, and represented to some degree a pure capital good where almost all the cost are paid upfront for a stream of revenue in long term.

From a risk perspective, it was safe. And so long-term funds which needed safe investments at moderate yields started piling in. The utility scale projects expanded, driving down the cost of equipment, and fostered more innovation there. Here is a case where, the technical simplicity of the operations enabled investors to bypass the typical operating businesses to get into the underlying projects themselves. All of a sudden, it is not about looking for the premium anymore. Because you’re alright with scale.

Sometimes, growing and developing a market is about finding customers who are willing to pay a higher price; but other times, it is about finding investors who are willing to accept a lower expected return for other attributes.

Projection vectors

I had a very interesting conversation with my colleague about projections of reality. When you take a picture of a scene, what you are doing, is to capture and preserve the light that is reflected off the three-dimensional scene and projected on a flat two-dimensional surface such as a film, or a sensor chip. Using mirrors, lenses, and all the other photonic gizmos, we are able to shrink the pictures, create effects on the projection, or to just make edits after the projection has been made.

What happened however, was that a three-dimensional reality is captured somehow in a two-dimensional world. The picture, is a projection of reality at some point of time. That is what we were referring to as projections.

We were speaking more about how we perceive the world as projections – cast not on a surface but in our minds. Each and everyone of us experiences the world differently but the richness of the world is not fully captured by the experience we have because we are limited in our ability to perceive. It is as though our ability to perceive each represents a dimension. Not just the five senses of sights, sounds, smell, taste and touch but there are psychological lenses, cultural lenses by which we perceive and experience the world, and recognise patterns formed from combinations of those senses, and our logical or irrational interpretation of reality, or even events, how they had been sequenced, how they line up in the dimension of time.

If the richness of reality contains N-dimensions, then our ability to perceive is often limited to (N-x) dimensions, where x is an unknown non-negative number and potentially really large. We don’t get to really experience reality, only what can be captured by that (N-x)-dimensional hyperplane that will never truly encapsulate the contents of the N-dimensional hyperspace that the reality consist of.

I hope to be able to explain this better some day – but for now, this hopefully suffice to help encourage me to develop further my capabilities to grow my hyperplane of perception.

Manufactured feel

When we travel, we visit places of interests, stay in hotels or some kind of accommodation with “curated experiences” and follow guides to eat the popular foods in a place. Is this sort of traveling about experiencing the local life or about manufacturing the feeling or a “foreign experience”?

It’s probably both.

When does an experience feel manufactured? And is that a bad thing? After all, we manufacture things because they are not readily available in nature. We might be the only specie that tries to manufacture feelings or experiences or put ourselves through something radically different than our “everyday life”. Monkeys don’t go on exchange programmes with a different tribe; Donkeys don’t try to live the day in the life of a camel.

So what do we really gain? Why do we dread the everyday? What is wrong with routine life?

Learning from mistakes

The tricky part about trying to learn from mistakes is to overly focus on the mistakes rather than the lessons that are being taught by the mistakes. The lessons are often things you discover upon making the mistake; they represent new knowledge or information that you previously weren’t aware of. Yet we rarely dwell on those; because we’ve been told that finding those ‘reasons’ are actually just finding ‘excuses’.

A few good questions to tease out the lessons to learn would be:

  • What is something I did not know that I now know, having made the mistake?
  • What new relationship between variables did I discover upon making the mistake?
  • What are some patterns that should raise red flags for me in future?
  • What are false red flags created by this mistake that may cause me to be overly worried or cautions about actions in future? How do I tell?

Moving past blame and finding fault after discovering a mistake is not easy, but it starts with a mindset that is focused on learning, and moving forward. To release oneself from the emotional downward spirals, diving deeper into some of these questions is useful.

Healthy competition and values

I was put in a system where we were regularly assessed relative to our cohort, made to feel anxious about our position amongst our peers, and put in an artificial environment where we were taught to improve through ‘healthy competition’.

The society’s definition of healthy competition does get out of hand. Guardian recently ran a piece commenting on the number of ‘Forbes 30 Under 30’ featured people who landed in jail or at least trouble with the law.

It’s not just that competition gets out of hand but a question of what kind of values we are sending young people into the society with. Beyond the glamorization of the ideas around hustling and ‘faking it till you make it‘, there is clearly a lack of clear direction on the moral boundaries that should govern the claims made by companies to get ahead in terms of creating investor interest, or customer demand. Is it not time we draw a line, and re-align definition of success with actual activities that will move society and the world forward?

Flinging ideas

I write for many different reasons and with different objectives. One of the recent struggles I’ve been having with writing is to be able to convey depth of analysis and value of those ideas and insights to my target audience. I’ve traditionally always pondered deep and hard about various matters but did not necessarily structure my ideas properly.

While my role as a consultant helped significantly in terms of creating structures for my analysis, I need to get better at putting together the pieces of analyses not in the order by which they are done but in a manner than gives a compelling story and call to action for the audience. To put it simply, this is actually a life skill to develop that everyone and anyone can benefit from having. It is more about storytelling and bringing out the story with various mediums and different ways.

It is also a reminder that my training as an artist during my high school days were not wasted. Those were the times when I had to not just deliver a piece of art work as an end result but to document and share that process. Documenting the process may not be enough to really give a clear view of how one arrives at the outcome of a particular art work. It takes quite a fair bit of storytelling. That means filling in gaps, building bridges across different moments and different intermediate ideas, even seeing these intermediate moments that one can use to make the bridges connect.

Ideas are great but if they’re not put together with a good story, flinging those ideas around haphazardly is not useful. The poise and elegance of those ideas emerge through the stories that we tell.

Value functions

Economics assumes that people respond to incentives. And that requires some degree of rationality. Yet the interesting thing is that rationality is just perhaps one form of value function where we frame certain incentives as the metric that the agent is interested in and values. Revealed preference theory basically assumes rationality to pin down the preferences of people based on the choices they make.

Yet if we adopt the idea that there’s a value function, then rationality doesn’t even have to hold for the notion – that economic agents respond to incentive – to be true. Because if someone is “mad”, then it may just mean that he or she has a certain value function that lacks certain features or patterns which are consistent.

So it could be that their value function are not monotonic when mapped to specific features of a product or experience. This is to say that they may like their noodles to be extremely soggy or extremely hard, but not in-between. So to some extent, their value function is a U-shape when map on the extent of noodle sogginess. This type of ‘inconsistency’ can be seen as lacking rationality when it comes to certain money-based decisions. But mathematically, they can always be described and simply opens up more ways we can analyse these problems.

Transition from truth

We learn things in school only to learn at the next level of school that what we had learn was not exactly true. Each time, our simplistic view of reality gets increasingly replaced by a more sophisticated and nuanced view of the world. But not just that; there are ‘truths’ we learnt in school that eventually gets surpassed by new findings and they become untrue.

Or take for example some theories and ideas in social sciences; they evolve with our understanding of society, culture and economics – which means they’re not as timeless and can shift from being once true to becoming untrue. (In economics, an example would be the Phillips curve relationship between inflation and unemployment – a relationship that broke down the more Central Banks tried to take advantage of it.)

So how do we know and observe when a piece of idea, knowledge or conventional wisdom makes that transition from being truth? What measures can we take to insulate ourselves from that? How should we think about ‘truths’ we hold dear to our hearts or subconsciously in our minds?

Magic of going through the bad

If you think you are not good enough to do something, then ask yourself if you’ve been bad enough. I recall a time when my English was really bad. Actually it is still bad. And so is my writing. But I never let ‘my bad’ stop me; it is precisely going through being bad that one can be good.

And this animation by Danny Gregory puts that message together nicely. Enjoy.

Going back to objectives II

What happens when people at the ‘grassroots’ level of a system tries to solve a system problem, or deal with the symptoms and consequences of a systemic issue? How often have we asked this question and consider how pervasive such a problem archetype is in our modern society?

Corporate change and transformation department should be framing questions this way to uncover projects they can work on. Far too often, there are departments operating at ‘corporate’ or ‘strategic’ level of the company just trying to find easy-wins lurking around the organisation to create some kind of change project. The small projects that affect one or two stakeholders can be better dealt with by themselves. Collecting problem statements on the ground may not be the best because ‘the ground’ tend to contextualise problems within their own scope of work or scope of influence. When they do point out something that is more systemic, it is overwhelming or that they point to merely a symptom of underlying problems.

The corporate strategy department needs to hunt down problem statements by considering first what is the objectives that the company is trying to achieve overall, and what are some of the internal elements of the company that is hindering it from achieving its objectives. That would be more useful corporate change. Solving problems that prevent what existing department perceives as hindrance from them doing ‘their work’ may not always be optimal because ‘their work’ can be a function of the existing silos of an organisation and not exactly meeting the overall objectives of it.