Peg Points

December 2, 2010

Dealing with Compression is a wooly undertaking. Just contemplating so many new factors in making decisions taxes any individual’s intellectual comprehension beyond its limit, and emotional strain may be more draining. To make it humanly possible to handle this complexity, we must develop highly versatile, vigorous learning organizations, each dedicated to a limited, but “doable” mission that ties to the compression of resource usage. That level of organizational competence and agility has hardly been contemplated heretofore, much less aligning an organization’s mission to a global goal.

Alignment is not unthinking lockstep. It’s teamwork among thinking people all pointed at the same mission or goal; still tough. In today’s less demanding organizations, aligning diverse people on a simple common theme consumes more energy than leaders are wont to give to it. Smart peoples’ ideas, each one topping the others, hive off in all directions. Some counter this by having everyone bend their knees to the same performance indicators. But too often the only indicator is how much money is made, and it’s not disclosed to everyone.

In principle, taking in more money than one spends is easy to grasp. Unfortunately, it offers little operational guidance to people on what to do. Give dancing lessons? Shovel manure? Run drugs?

Most working organizations today have operational performance “indicators,” which is a good term for them. Implies not blindly chasing the numbers, but using a high-level measurement as a rough indicator of progress or the lack of it. But to do that, indicators need a “peg in the ground,” a base point from which succeeding measurements suggest whether we’re doing better or worse.

To see whether we’re making progress coping with Compression, Global Primary Energy Consumption isn’t bad – not the one and only; but not bad. Primary energy is that which is traded, all commercial fuels. Of course, there are also problems such as individuals overcutting wood for their own fuel, but industrial societies rely on primary energy.

Index of Global Primary Energy Use, Past and Projected

Peg Points and Ceterus Paribus

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Notes: The base index point of 100 in the year 2000 is pegged on 9259 million tons of oil equivalent energy total world use:  BP Statistical Review of World Energy 2010, p. 40.

As one can see, global primary energy use has risen by twenty per cent in the past decade. The lion’s share of that rise is from China, India, and other industrializing countries. North American consumption actually dropped almost five percent, but one can argue that NA transferred much industrialization “to China.”

The 75-25 split in the index in the year 2000 is from the “educated assumption” that about 75 percent of primary energy is in industrial economies (counting China, which is now consuming big-league). One can plow through the country usages in BP’s statistics and other sources, but no precise split can be made. So to set a target index as an objective, pick a rough number. Almost any sensible split of this type leads to the conclusion that industrializing regions must figure out how to make a big crunch and developing regions must figure out how to dramatically improve quality of life without depending on big increases in resource use. This index chart suggests a goal of 78 percent reduction from 2010 levels in primary energy use by industrial economies within thirty years – a big stretch, but not impossible.

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The base point and the objective in the figure above come from that innocuous looking operational challenge of Compression:

By 2040 globally develop a quality of life somewhat like industrial societies today, but using less than half the virgin raw material and less than half the energy as in the year 2000, and with no known toxic releases.

This presents an ugly picture, you say. But it’s not at all ugly compared with resource wars and fighting over trash piles. We waste so much that first cuts (10-20 percent) would hardly be missed, and few business models would need much change. After that, the head scratching begins, but it can be directed on one common, serious goal. As long as sustainability goals are complex and mushy, and no one can peg “where they really are,” organizations can pick off easy, symbolic actions; then drop a nice drib or two in the Corporate Responsibility Statement to make them look good.

The head scratching will be over reworking business models and anticipating how an apparent solution to a problem on a big scale can be derailed by unanticipated shortages or unintended consequences. Vigorous learning organizations have to become adept at pleasing their customers while avoiding these dead ends.

In the next letter, we’ll address time lines for action. But if you have operational experience, it is obvious that the big delay getting started is developing the culture and mindsets to aggressively pursue a very different direction. That is our biggest challenge.

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