Category Archives: Infrastructure

Chicken and egg problems

I first heard about this as a question around which came first and the challenge of studying causality in somewhat circular systems. But then it was also characterised as a problem when we want to develop a new system to displace the prevailing one. It is some kind of situation where you need something to start another and you need the other to get the something you need.

Classically, if you want a thriving business, you need customer, stakeholder support but in order to do that, you need to have the business first. Or that you need capital to build a business but then quite likely the route to getting money for capital is to have a business. When success builds upon success, based on what you can observe, then you have a chicken-and-egg problem on hand when you want to create the success to begin.

Essentially anything that involves some kind of circularity exhibits this kind of problem when it needs to be first put in place. Several strategies have been looked into for this problem. There’s bootstrapping – which generally entails squeezing out some resources from existing pockets/spaces to be able to get the first bit of results which will drive more. And then let it snowball.

There’s the ‘fake-it-till-you-make-it‘ approach, which involves essentially lying to at least a small group of stakeholders to get them onboard in order to bring in the others. I do not recommend this. Finally, you could also take immense amount of risks, exhausting resources, adopting the ‘build-it-and-they-will-come’ approach.

Governments in particular do all three a lot. And it can be wise to learn from them when it comes to business. Sometimes they can be good entrepreneurs.

Real circularity

There is a collorary to our economic system in nature. It’s not considered a single subject or discipline but involves a mixture of physical geography with ecology, biology and so on. Nature is truly circular to the extent that the outputs of one system feeds into the input of another and the overall grand scheme of things is in a kind of dynamic equilibrium that eventually shifts over time.

For a while humans have mimicked nature in creating circularity in our economy. And then we gave up because it was easier to scale things up and create wastage in order to fulfill profit motives. The unequality in an economy, the more wastage is produced because production gets inevitably skewed towards satisfying a demand that is aligned more to the distribution of “means” rather than a distribution of “needs”.

Nature behaves differently because the currency of nature is multi-dimensional and rich. There is no “monetisation”; nature do not base its value on a single commodity. You can’t exchange one calorie for another easily within the diet of most animals.

Real circularity involves richness that the industrial capitalist manner of approach cannot replicate.

Plastic, cheap and perceptions

Singapore Airlines is trying to switch their in-flight dining serviceware to paper rather than the current single-use plastic and met with accusation of attempting to cut costs. There is an issue also of sacrificing in-flight experience of customers for the sake of costs despite profits.

There are a few dimensions to consider in the debate and wider issues around the consumerist culture and system we have created. For the longest time, it pays off for companies to upsell: by providing better materials, packaging, a little more space and convenience, they can sell at higher price than it costs them to deliver the service or product. In fact sometimes they spend additional costs to cheapen the alternative because encouraging you to consume more and creating the cheaper alternative simultaneously enhance their customer base without cannibalising on some of their profits.

But as we step into a world where sustainability matters increasingly, these values and strategies we used to leverage on becomes more complex. We no longer just trade off customer experience, price and the costs of providing that experience. Now we have to consider how much being sustainable adds or subtracts that experience, how perceptions will be reshaped. And how important this is, for our culture to shift towards more sustainable consumption.

What would a net zero agrifood business look like?

Talking about creating net-zero businesses reminds me of the time when I wrote about zero-based thinking about the education system. Only by reconstructing what we want to achieve from scratch, can we try to uncover new innovations and ideas that we have been missing out to think about problems we have.

The agrifood industry supposedly produces about one-third of all the carbon emissions that humans are responsible for these days. We can try to think about where to cut emissions or we can consider how to overhaul things. One of the chief challenge of the world today is that we have been taking the theory of comparative advantage and trade too far, forgetting in part the risk of concentration, and the issues around carbon emissions of the logistics and supply chain. Once we start factoring in carbon costs, we can start considering more about growing and consuming local more because it might actually be worth the while.

Overspecialisation in the agrifood sector may bring about economic efficiencies at the expense of carbon emissions and food security. A long time ago, there were stories about fish being sent from the Nordic seas to China to be fillet only to be sold back in the Nordic states. It is a reflection of how capitalism have morphed our appreciation of craftsmanship, and our values around environmental stewardship.

So a net-zero agrifood business quite likely will have start from considering crop cycles, relevant crops to be growing for the local taste and preferences, and the techniques for cultivation, processing, and marketing these products. It will have to reduce distribution or tap on synergies with other nearby industries for distribution. It should concern itself with strong focus on quality and selection of robust crops.

Of course, it will also concern itself with minimizing packaging, pioneering newer retail approaches; once again leveraging more on synergies with surrounding industries. Of course, there is still room for trade and exporting but it might be harder especially if the produce is perishable. Nevertheless, the idea is no longer to use economies of scale and efficiency to sell to the mass market and allow the whole capitalist-industrial complex to be built upon heaps of waste and trash.

Forecasting scenarios

What sort of forecasting is better?

  • If this, then …
  • It will be …

The first makes assumptions explicit. The second hides the assumptions and takes them for granted.

In my work as a strategy consultant, I make extensive use of scenarios, and often we might not consider the likelihood of scenarios while constructing them. It matters because it helps us to immerse ourselves into a reality such that our construction of the reality is not affected by how likely we think it would be. It is more important to be able to extensively work our the implications of our assumptions at that stage.

Only after the scenario modelling is complete, it makes sense to step back and examine the assumptions, perform sensitivity analysis and consider how the outcomes are sensitive to some of the assumptions.

And then what? Then we consider likelihoods of those assumptions manifesting.

Dynamic cost-benefit analysis

One of the most power tools that economics have brought to the world is cost-benefit analysis and really assessing what is the constitution of cost or benefits at various levels: individuals, firms, regional government, national government, countries.

Where it fails is the ability to properly ascribe who cares about what. The assumption around rational, selfish agents cannot possibly hold in reality. On the other hand, there is radical inconsistencies when you perform such optimisation on behalf of “government” which is staffed by human agents and with politicians have their own agenda. Over the years, these poor assumptions have made room for more colourful, richer analysis of agents, decision-making units at different levels.

Now if we move our attention to the dimension of time rather than perspective of our agents, we realise another issue. We can assess somehow the cost and benefits of today if we use our imaginations but to stretch it to the future would require even more manipulations. And the uncertainty make render the exercise less fruitful than one may expect.

Alas, we continue to use these tools expecting them to work while not having proper assessment of whether they work or not when the outcomes play out in reality. It is not the issue of calculating those figures but how we incorporate them into our judgment that matters. Yet with limited budgets and resources, most have chosen to opt for a semblance of the exercise, paying a smaller cost but getting almost none of the benefits.

Energy carriers

It can be pretty hard for me not to think about energy. It probably has to do with my job but the topic itself is fascinating. In some sense, ‘energy’ could be a subject itself that draws on science, mathematics, economics, engineering, law and many more disciplines to help us make sense of it. While we learn a lot about it in science, most of those fundamentals just remain where they are in our minds and do not connect with the wonders of modern technology and everything that we are so immersed in.

Electricity of course is the most fascinating of it all. It is the energy form that we have been able to manipulate with great precision and even enable energy to take on so much more new roles in life that it would not have been conceived to take on centuries ago even when electricity was first discovered. Electricity of course is a form of energy manifesting and needs to have various mediums, and the best carrier of electricity remains to be chemical batteries.

There are many other energy carriers as well and typically these are fuels; they are released through combustion. That produces heat energy which then can be transformed into kinetic energy, and in turn that tends to be then transformed into electrical energy with appropriate mechanisms such as some kind of motor and generator.

Carriers of energy are themselves interesting and fascinating because there are losses that results from going through the carriers and the various different forms of them. They also come in different forms, shapes and stability, influencing their functionality. Coal is a solid fuel; oils are liquid while natural gas is gaseous. Their state allows them to be conveyed differently and also affects the cost of transporting them.

Last century, the world was afraid of running out of them. Because they are commonly known as non-renewable energy. We use them faster than we can replenish them. Fossil fuels are created through millions of years. This century however, we begin to realise we will end up changing the climate of the world even before we run out of fossil fuel so we’re in a race to phase it out as quickly as we can. Alright it isn’t actually a race because many countries, organisations, assets are stubbornly using it.

But the point of this piece here is to help us recognise that fossil fuel does not have the monopoly in carrying energy and there can be more ways for us to obtain and use energy. Ways that can lead to sustainability and circularity in the world.

Net zero actions

Reducing carbon emissions is about doing less things. But our culture and economy is not used to that. Maybe that’s why it is easier to sell the idea that we must do more new things or different things.

New actions from various parties in the economy requires new forms of coordination. We are not familiar with all that and neither are we familiar with the roles, actions and expectations.

In some sense the talents who used to do this sort of work would have come from those with public policy background but because of the manner the economy and talent flows have evolved in the past few decades, these people now come from everywhere.

For those in research, it is knowledge that catalyses actions. For those in politics it is the voice from the people. And for businesses, it would tend to be what constitutes opportunity, these various pockets of objectives, desired outcomes and tools need to be laid out and strung together.

It’s not too late. But things need to be done.

What is waste?

What constitutes waste for you? Is it when you decide something is useless for you? Or when you throw out something? Where you dispose of them matters because it defines where it goes and it determines what happen to the materials or matter and if it is classified as waste. The overall psyche of our current populace is mostly driven by the out of sight, out of mind approach to waste.

We could change the very idea of waste so that there is better recognition of the value of the material. This helps reduce the waste and encourage reusing.

Or we can make it way easier to recycle. But recycling will have to be different from disposal. And the recycling activity needs to be valued differently.

End of oil III

In the absence of the price signals I wrote about in End of Oil II, what do we do? And besides, there had been so many recent fiascos about carbon markets that this instrument risks losing its credibility entirely and make it even harder for carbon emissions to be priced.

Pricing carbon is not just about credits of course. Carbon taxes are forms of prices and if we want to be stigmatising carbon emissions, we can even call it a fine but then the difficult is that we all are emitting carbon so at the end of the day the price will still be sort of a “license to pollute”.

Perhaps better to suggest and highlight that the taxes, credit revenues are going to be reinvested into decarbonisation. In any case, we do need more investments, funds and support towards that. What better way to fund it than to use the proceeds from carbon pricing to achieve that?

And we really can’t wait for the private initiatives and the market to get that going. At the same time, governments cannot afford to try and design the perfect market for it all to work. Rather, if carbon credits is not going to take off, the whole slew of regulation will need to be rolled out including renewable portfolio standards, carbon taxes, renewable gas blending mandates, ban on internal combustion engines, etc.