Tag Archives: economics

Picking problems II

I wrote about how people can’t solve problems that they are not willing to have. Yet one has to master the art of picking the right problems to work on as well. There had been times in my life when I wasn’t sure which problem to pick on dealing with and my attention became so diffused I wasn’t actually solving any problems but simply touching and going.

A lot of that life was during my previous career. We were often under a lot of pressure to do many things and deal with lots of problems with limited resources. And the result was the need to frequently and quickly get through a problem, declare it solved, and then go on to another one. There were long term issues, and shorter term ones. And one must learn to be able to prioritise them, as well as to properly trade-off resources across the long and short term challenges.

That prioritisation eventually becomes another challenge in itself. And this sort of self-referencing issue keeps popping up over my professional life. I discovered the importance of setting up buffer time for planning, to set aside budget for solutions to manage budgets and to ensure sufficient rest to be able to actually be producing more. Often times, we don’t recognise that the problems we pick naturally lend themselves to some peripheral problems that we need to deal with. That problems actually comes in a package when we are picking them.

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.

Importing green energy

Singapore is going to import low-carbon electricity soon; well, technically it already has been importing these electricity through some “small pilots”. The idea of importing electricity isn’t new. For a long time, Thailand had been importing power from Laos, developing hydroelectric plants there and building transmission lines into their network.

Most regional electricity markets started out first with interconnectors to help with load balancing, which also provides for imports and export. The Nord Pool in Nordic states started out that way. And the purpose of that had always been to enhance resilience and promote regional integration.

Singapore’s case is interesting because of the focus on securing green electrons. From a GHG Protocol carbon accounting standpoint for Nationally Determined Contributions to emission reduction, the electrons that are imported are carbon-free. This is because countries only need to care about Scope 1 emissions. That is to say the electricity exporting country will need to care about their energy mix and be responsible for the carbon emitted during the power generation process.

At the country level, all imported electricity is carbon free. But for companies consuming the electricity, things can be complicated. Do they use the grid emissions factor assuming the imported electricity is carbon-free? Are retailers who purchase the import electricity able to claim the power is carbon-free?

Because of these controversies, Singapore took the clear path of requiring the power imported to be from low-carbon sources / renewable sources. So hydroelectricity qualifies, and so does solar and wind. The challenging layer that Singapore added to the electricity importers is for the power to be firm; ie. the solar power cannot be just supplied in the day when the sun is shinning. The message is that we want green electricity but not the intermittency that comes with it. Nevertheless, managing the intermittency will come down to the importer rather than the exporter since the requirement comes from Singapore.

I do wonder if this whole musical chairs around who should own the cost or benefit to the matter of carbon emissions a big distraction from the world’s attempt to reduce carbon emissions though. If Singapore could simply develop more projects overseas and secure the relevant credits from other countries on a government-to-government basis, we could still create new instruments that could help to release more supply of green energy for companies in Singapore to meet their obligations.

At some point we need to cut through the whole posturing, learn to be strategic together as Team World and work on the problem of climate change together.

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.

Smoking and carbon emissions

When dealing with a global issue with local variations of a problem and the need to change culture the way we are trying to do with climate change, there are important lessons we can learn about curbing smoking, especially here in Singapore.

Before we go there however, I want to first envision a state of the world where carbon emissions become more like stigmatised like smoking. Carbon-emitting industries would be like the cousin or uncle we have who is our relative and we can’t quite shake off but still be puffing away, causing our clothes to smell and our lungs to be polluted. We would want them to smoke far from us but they will inevitably bring that odour and whiff of smoke, and also ash back to us.

As employers, we would have competent workers who are smokers – and while we know that they might be taking smoke breaks, we still need to keep them as they are largely productive. So they will continue to exist, but we can treat them a little badly to nudge them to reduce their carbon emissions. Currently, we’re definitely not doing enough.

Some ideas on how to treat the carbon-intense companies/industries like smokers:

  • Labels could be slapped on all of the products and service invoices of these companies – imagine going down the aisle of supermarkets and seeing these labels on the fresh beef packaging.
  • These industries could be made to situate together (maybe within a yellow box); and if they are not in that given zone, they cannot run processes that emits carbon dioxide above certain threshold.
  • Tax them based on escalating, progressive carbon tax rates; this is above
  • These companies are not allowed to emit carbon dioxide until they registered their business in the jurisdiction and operated for at least 21 years.

So consider if we are doing enough for climate change; compared to public health. Both concerns survival of a nation, of the entire mankind.

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.

What would a net zero business in your industry look like?

We spend a lot of time thinking about emission reduction. And it is all based on considering the existing state of affairs and how to move ahead from here. So we often consider how a process can be optimised to use less energy, or to use alternative materials. So a decarbonisation roadmap plays an important role in considering an existing business and how carbon emissions can be gradually eliminated from the workings of the business to transit it towards a low-carbon economy.

But just as important is how we can envision a new business to perform exactly the functions of an existing business but with zero carbon emissions. It is no longer about mapping or developing emissions baselines but rethinking how the same process can be achieved without emitting as much carbon. It is rethinking processes altogether. Heck, it might even involve rethinking products.

Major oil & gas companies are now refashioning themselves as provider of energy, competing with their customers who are power generators. Or they can think of continuing to supply the electricity generation players by going into mining and extracting of minerals and metals that are needed for wind turbines and solar panels. Or they could reconsider that they are actually logistics players ferrying molecules around and look into dealing more with chemicals transport. They could even consider themselves producers or inventors of new materials.

This exercise can be repeated for other industries and we could potentially have very interesting outcomes.

Finding good people

Can people be talented in terms of their attitude and work ethic rather than in content? I think it is potentially harder to find good people who takes ownership in their work and do them well than so-called skilled people. Because our work and education system increasingly churn out lots of generalists in the market, education stops being a good system for sifting out the non-committed, the slackers and non-resilient.

We want the system to help everyone get a degree, get good jobs and get paid well but we forget that our market system continues to be built on the competitive premise of “may the best team win” – which is to say that at some space between the education system and our industries, something is going to snap.

To move away from creating broken systems or breaking one part of the system while trying to fix another part. You choose.

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.