20/20 Foresight

20/20 Foresight: Crafting Strategy in An Uncertain World
By Hugh Courtney
Harvard Business Review Press, Boston, 2001

What better way to start 2020 than a book called 20/20 Foresight?

There’s an old Danish proverb that says,

“It is difficult to make predictions, especially about the future.”

Difficult for sure, but we do it all the time anyway.  Whether it’s something as simple as arranging to meet friends after work, or as complex as developing business strategy, we’re making predictions and dealing with uncertainty.

20-20 Foresight - cover

20/20 Foresight: Crafting Strategy in An Uncertain World is about how to define business strategy in the face of uncertain predictions about the future.

Hugh Courtney, Professor of International Business and Strategy at Northeastern University, wrote this book back in 2001, but I think the framework he created is still useful and powerful today.

Levels of Uncertainty

The first thing Courtney does, and probably the most valuable part of the book, is to show us that not all uncertainty is alike.  He identifies four levels of uncertainty.

20-20 Foresight 4 Levels

In situations with Level 1 uncertainty, there is only one possible outcome, or a very narrow range of outcomes.  An example might be predicting population growth to estimate the size of a potential market.  Population growth is well-understood and changes relatively slowly, so projecting, say, ten years into the future, does not involve much uncertainty.

With Level 2 uncertainty there is a small set of discrete, mutually exclusive outcomes.  Take government regulation. The government could decide to step in and regulate political advertising on social media, for example. While the exact regulations may not be known, there is only a finite number of ways this can be done. Policy analysts should be able to identify the most likely types of regulation and maybe even assign probabilities to each one.

Under conditions of Level 3 uncertainty there is a continuous, rather than discrete, range of possible outcomes and the actual outcome could fall anywhere in the range.  A good example would be trying to predict the value of the S&P 500 stock index five years from now.

Finally, Level 4 represents radical uncertainty. Here there is true ambiguity, many “unknown unknowns” and both the range and the nature of possible outcomes is unbounded.

As time passes and more information becomes available, the level of uncertainty decreases.

Knowing the type of uncertainty you’re dealing with helps you set strategy.  Courtney lays out a set of questions that people should ask themselves when defining strategy, and provides some guidance on how to answer those questions depending on the prevailing level of uncertainty.

Shape or Adapt?

Should you try to shape the market or industry or situation you’re in, or adapt to it?

To be a shaper, you’ll need to introduce fundamentally new products, services or business processes.  You might need to redefine industry standards.  You could reshape your industry through mergers, acquisitions, integration or divestment.  Or you might replicate existing business systems in new markets.  As a shaper you will influence your competitiors’ behavior.

Adapters on the other hand may choose to follow a shaper’s lead.  This could be a good hedge against multiple possible outcomes (level 2 or 3 uncertainty).  It requires continuous experimentation and a flexible organization to adapt quickly and successfully.

Apple’s introduction of the iPhone is a clear example of a company, well Steve Jobs really, deciding to be a shaper. Apple completely redefined the mobile phone industry despite the presence of established incumbents.

Now or Later?

Do you need to act now, or can you wait, perhaps until more information become available?

Courtney suggests that “no regret” moves, that is moves that make sense no matter what the outcome, should be done now.

Beyond that, you need to ask yourself are you trying to maximize upside potential or minimize downside risk (i.e. reduce uncertainty)?  You’ll need to make big bets for the former, and explore real, present-day options for the latter.

When looking at real options, Courtney suggests they should provide an asymmetrical payoff.  In other words, a small investment should yield a large reward.  The Black-Scholes model can help you figure this out.  Examples include options that help you learn about new business opportunities, markets or technologies, and options that help you hedge agains undesirable outcomes.

Courtney says that situations of high uncertainty favor exploring real options, while known competitive threats favor making bit bets.

Focus or Diversify?

Should you focus your investments or diversify?

Courtney describes different types of investments that can help reduce risk:

  • Diversification: a group of investments that have uncorrelated outcomes or risk.
  • Hedge: investments that have negatively correlated outcomes.
  • Insurance: provides specific payoffs for worst-case scenarios

If you’re a shaper acting now, Courtney says you should focus.  If you’re an adapter who can afford to wait, you should diversify.

The answer also depends on the type of uncertainty you’re facing.

  • Level 1: No need to diversify.  In fact, diversification would be wasteful.
  • Level 2: Use hedging and/or insurance to reduce risk
  • Level 3: Diversification plus insurance to guard against the worst-case outcomes
  • Level 4: Focus if you’re willing to accept high risk/reward, otherwise diversify and insure.

Tools

Courtney ends the book with some tools for thinking about strategy under radical Level 4 uncertainty. He suggests working backwards from your desired strategy and asking questions like:

  • “What would you have to believe …” or “What assumptions would you have to make …” in order for a given strategy to succeed?
  • Or what facts or developments are needed to reduce the uncertainty to Levels 3, 2 or 1?

All in all, 20/20 Foresight is a powerful way of thinking about and developing strategy in uncertain conditions.

Related Links

A fresh look at strategy under uncertainty – a 2008 interview with Hugh Courtney in McKinsey Quarterly
https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/a-fresh-look-at-strategy-under-uncertainty-an-interview

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2019 Recap: A Meta-Post

photo of fireworks

Photo by Anna-Louise on Pexels.com

New Year’s Eve seems like a fitting occasion for a meta-post; a post about posts.

Looking back over 2019, I wrote 19 posts.  Coincidence?  They break down into these categories:

  • Management & personal development: 4
  • Environment & energy: 4
  • Personal reflections: 3
  • Computers, science & technology: 2
  • Fiction: 2
  • History; 1
  • Politics: 1
  • Law & justice: 1
  • Miscellaneous:  1

My interests are pretty broad, but they’ve certainly shifted towards environment and energy, especially in that last half of the year.  I expect that to continue in 2020.  Being an election year here in the US, I imagine I’ll post more in the politics category too.

19 posts is pretty small output compared to lots of other bloggers, so I’m going to try step it up next year.

As always, thanks very much for reading!

Happy 2020!

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Range

Range: Why Generalists Triumph in a Specialized World
By David Epstein
Riverhead Books, New York, 2019

I didn’t finish Range: Why Generalists Triumph in a Specialized World for the same reason I don’t eat chicken wings: too much effort for too little reward.

Range - book cover

I’ll give an author 100 pages.  If they haven’t captured my interest by then, I stop reading. I rarely invoke my 100 Page Rule, but I did with Range after the first four chapters.

It’s too bad really.  I had high hopes for the book because I figured it was about … me! At least, I see myself as something of a generalist, and I do have a wide range of interests.

Range was written by David Epstein, a journalist who has written for ProPublica and Sports Illustrated.

Epstein’s main idea in Range is this:  to be successful in today’s world it seems like you have to be a specialist, focusing in on a narrow field, and you have to start from a very young age.  Yet in reality, the most successful people in any field, Nobel Prize winners for example, demonstrate breadth of knowledge, diverse experiences, interdisciplinary thinking and delayed specialization.

And those characteristics are becoming increasingly important in today’s world.

Epstein distinguishes between “kind” and “wicked” learning environments.  In kind environments, the rules are well understood, patterns repeat frequently and feedback is fast and accurate.  In wicked environments the rules are not understood or even defined, patterns might not repeat and feedback is often delayed and/or unreliable.

Early specialization and deliberate, intense practice might help someone succeed in kind environments like chess or golf or piano playing, but they are wholly inadequate strategies for coping in wicked ones like a hospital emergency room. Increasingly, we live and work in wicked environments where abstract thinking, the ability to make inferences based on incomplete data and to make connections across different knowledge domains are key.  These are environments where range is critical and generalists succeed.

So what’s so bad about all that?

It’s not that there were no interesting ideas in Range, just not enough to earn my time and attention.  I was especially put off by long digressions into historical details — like the story of some 17th Century orphan girls who became famous musicians — that just didn’t add very much to the overall thrust of the book.

As an aside, a digression of my own I suppose, I see many authors these days trying to imitate Malcolm Gladwell’s narrative style.  Gladwell is a terrific storyteller and he can go off an a tangent and usually make it work, or at least make it entertaining.  Few authors can match Gladwell’s ability and I wish they wouldn’t try. It just gets annoying.

Anyway, the specialist-generalist debate is really a false choice.  Both are needed. Teams cannot succeed without some people who have deep expertise and others who can make connections across diverse areas. In your own work you will probably need to be both too. Early in your career or even in a new job, you typically need to specialize in order to learn and contribute and build credibility.  Later, especially if you move into a leadership or management role, you won’t succeed unless you can generalize and take a broader, long term view.

I think this post by Thomas Oppong on Medium captures it well: The T-Shaped Approach To Building a 21st Century Career. And it’s only a four minute read.

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Peak Stuff

I’m going to try something different in this post.  Instead of reviewing a book, I’m going to look at a research paper called “Peak Stuff — did the UK reach a peak in material consumption in about 2001-3?

Sounds pretty obscure, right?  Why would anyone want to read such a thing let alone write about it?

Fair question. I’ll try to explain.

grocery cart with item

Photo by Oleg Magni on Pexels.com

Many people these days believe our way of life is unsustainable, that the Earth cannot support a growing human population with a seemingly insatiable appetite for material goods built on an assumption of unlimited economic growth.

These are valid concerns.  You only have to look at the headlines or perhaps just look out your window to see the impact humanity is having on the environment.

Yet it’s not all bad news.  One positive development is that we are learning to produce more goods using fewer resources and less energy.  This phenomenon is called dematerialization and it’s pretty widespread.  You can learn more about dematerialization in a book called More From Less by Andrew McAfee which I reviewed here.

With enough dematerilization, some people predict (or hope?) that economic growth could become decoupled from resource consumption.  First, resource consumption would grow more slowly than the economy as a whole.  That’s called relative decoupling.  Then, ideally, we would progress to absolute decoupling where the demand for resources and energy actually falls while the economy keeps growing.  Decoupling would help relieve the pressure humans are placing on the environment.

Peak Stuff is a paper that looks at decoupling in the UK.

Peak Stuff was written back in 2011 by Chris Goodall, a British businessman, writer and former Green Party candidate who runs a blog called Carbon Commentary, associated with The Guardian Environment Network.

Goodall’s thesis is that the United Kingdom may have achieved absolute decoupling around 2001-3.

I’m going to walk through his argument because the method he uses to figure this out is just as interesting as his conclusion, and it can be applied to other countries too.

How would you calculate the amount of resources used by an entire economy in a year? (This sounds like one of those trick job interview questions you sometimes get asked at tech companies.)

Well it turns out you can weigh them.

National statistics bureaus in many countries, including the US and the UK, track the production, import, export, consumption and disposal of various materials by weight.

Goodall uses a simple flow model of the British economy illustrated in the diagram below to calculate the trends in resource consumption.

The model tracks material as it flows through the economy starting with inputs of natural resources.  These fall into three categories:

  • Biomass:  Crops, natural fibers like cotton and hemp, meat, fish, timber
  • Minerals:  Ores, clay, sand, stone, gravel
  • Fossil fuels:  Coal, oil, natural gas

These resources are transformed into products we consume, like food, paper and cars, and eventually end up as waste.

Using government statistics, it is possible to measure how much the UK is producing and consuming at each step.  Goodall tracks three key measurements.

  • Total Material Extraction (TME): The total weight of all the biomass, minerals and fossil fuels extracted in the UK.  Literally the weight of the stuff taken out of the ground.
  • Direct Material Consumption (DMC):  The amount of those materials actually consumed in the UK.  So this is TME plus imports minus exports.
  • Total Material Requirement (TMR):  Finished goods imported into the UK contain biomass, minerals and fossil fuels consumed in other countries where they were made.  TMR attempts to account for these additional resources by adding them to DMC.

Goodall shows that TMR in 2007 was 96% of its value in 2001 — a small but measurable decline.  Even though the British economy was growing during those years, the total amount of raw material consumed in Britain during those years fell slightly.  By 2009, TMR was only 81% of its 2001 level.  This is a sharp drop but likely reflects the economic slowdown of the Great Recession.

I wanted to find out what had happened since 2009 so I went to the UK Office for National Statistics web site and found data for Direct Material Consumption.  Here’s the chart showing data from 2000 to 2017.  You can see a significant drop in 2008-2009 during the recession followed by a very slight decline in the following years when the UK economy has been growing strongly.

I couldn’t find the raw data for Total Material Requirement, or it might have been called something different on the government web site.

Goodall goes on to look at trends in some of the key goods from the middle column of his model, and at trends in waste disposal.  In most cases there is a noticeable downward trend even before the Great Recession.  Goodall concludes, tentatively, that the UK economy may have achieved absolute decoupling around 2001-2003.

There are a lot of questions you could ask about this paper:

  • How accurate are the statistics compiled in the UK generally?
  • In particular, is Total Material Requirement, which include estimates of the foreign resources contained in imported finished goods, accurate?
  • Have the downward trends in Total Material Requirement continued after the Great Recession when UK economic growth resumed?
  • What is missing from Goodall’s flow model?  He himself has a section on fresh water, but, for example, he doesn’t talk about plastic and how it gets produced, consumed and disposed of.
  • Are developed countries like the UK just exporting their resource consumption to developing economies like India and China?

Nonetheless, the fact that Goodall could find even tentative evidence for absolute decoupling is really startling.  I’d love to see Goodall update his paper with the latest available data.  But even if absolute decoupling has not been achieved in the UK, there’s pretty strong evidence of relative decoupling at least.  That too is a step in the right direction.

This all sounds too good to be true.  Can we really have both sustainability and economic growth?  There’s a theory that as an economy develops it tends become more efficient in its use of resources.  If this theory is correct it means that that developing economies should also move towards reduced resource consumption as they advance.

As Goodall concludes:

“…. it is a hypothesis that suggests that economic growth is not necessarily incompatible with sustainability. In fact GDP growth, because it brings technological progress which is correlated with more efficient use of resources, may help reduce environmental damage.” [p. 23]

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High Output Management

High Output Management is one of the most disappointing books I’ve ever read, and in some places it flat out pissed me off.  

High Output Management cover

High Output Management
By Andrew S. Grove
Vintage Books, New York, 1983 (2015 ed. reviewed)

I started with high expectation.  After all, it was written by the late Andrew S. Grove, former Chairman and CEO of Intel Corp.  Grove is credited with transforming the company from a manufacturer of memory chips into the world’s leading producer of CPUs. During his time as CEO, Intel’s revenue grew by 4,500%.  He must have been an amazing and inspirational leader.  

You’d never know it from reading his book.

Overview

High Output Management is Andy Grove’s handbook for managers.  I’ll summarize the key points and then give some unsolicited feedback at the end.  

The book is organized around three main ideas.

  1. The focus is always on output. Everyone and every team produces output. A manager’s job is to plan, organize and guide their teams to produce the right quantity and quality of output in the right period of time. Because of this output focus, Grove uses manufacturing as the framework for discussing many management topics.

  2. In organizations, output is produced primarily by teams rather than individuals. The output of a manager is therefore the combined output of their team. So managers should spend as much of their time as possible on activities that provide leverage, that is, activities which increase the output of their teams.

  3. Teams function best when they are getting peak performance from every individual. It’s the managers job to get that peak performance through coaching, formal training, feedback and performance appraisal.

The book is divided into sections dealing with each of these ideas.

The Breakfast Factory

Grove uses the simple example of a breakfast factory that turns out soft boiled eggs, buttered toast and coffee to show us how to manage output,.  He talks about breaking work down into discrete steps, sequencing and overlapping the steps properly, understanding where bottlenecks can arise, and ensuring there’s enough inventory to meet customer demand.

This section also deals with the importance of metrics, which Grove calls indicators, Grove discusses leading indicators which can tell you what’s likely to happen inside the “black box” of your operation, and trend indicators which measure performance over time.

Quality assurance is one of the key aspects of managing any production process, and here Grove recommends monitoring quality at three stages; input material inspection, in-process inspection, and final inspection.  Inspections can either be done by gating where all material is held up until it either passes or fails inspection, or by sampling where material moves continuously through the process and random samples are taken to measure quality.  The goal is to identify flaws as early in the precess as possible.

Even if you don’t work in a manufacturing setting, it’s pretty easy to apply this to your own work. In my case, I work with a team that produces mathematical models using machine learning. We need to be concerned about the quality of our input data, whether the modeling process is running correctly, and whether the final models perform satisfactorily.

orange ceramic devilled egg stand

Photo by Krisztina Papp on Pexels.com

Managing Teams

Next Grove covers techniques for managing teams.  He stresses that a manager’s most valuable resource is their own time.  They should spend as much of their time as possible on leveraged activities; activities that either impact a group of people, or impact a single individual over a long period of time.

Grove also tackles decision-making in this section, He lays out a model for decision-making that has three main elements:

  1. Decisions should be made at the lowest competent level in the organization — a principle known as subsidiarity.
  2. Everyone should know their role in the decision-making process. Who formally makes the decision, who contributes information, who gets informed afterwards? There are various ways to organize this and they go by cryptic acronyms like RAPID, OARP and RACI,.
  3. Finally, once debate is over and a decision is made, everyone must commit to successful execution. This is known these days as “disagree and commit.”

The section concludes with a chapter on planning.  How do you identify and organize the actions and the resources needed to move from the present state to a desired future state? This is where Grove discusses objectives and key results (OKRs), but although Grove has been called the “father of OKRs” they’re really just a small part of the book. Objectives identify where you’re trying to go or what you’re trying to achieve. Key results are the milestones you use to measure progress. 

Peak Performance

The final section of the book is about what managers should do to obtain peak performance from the people on their team. Performance is a combination of motivation and capability, Grove says.

To understand what motivates people, Grove uses Maslow’s hierarchy of needs. But in the end he recommends using competition to motivate your team. Getting people to compete against other teams in the same organization, or against real industry competitors can help motivate exceptional effort and performance, he says.

“Turning the workplace into a playing field can turn our subordinates into “athletes” dedicated to performing at the limit of their capabilities — the key to making our team consistent winners.” [p. 171]

On the subject of capabilities, Grove walks us through the details of training, giving feedback and performance reviews.

Unsolicited Feedback

This all seems pretty reasonable, right?  So what’s so disappointing and annoying?

To be fair, Andy Grove wrote High Output Management back in 1983 and our views about management and organizations have evolved considerably since then.  And maybe his ideas have spread so widely, especially in the tech sector where I work, that they no longer seem fresh.  They’re just part of the atmosphere we breathe in many organizations.  

The book does contain a lot of useful nitty-gritty details, tips and tricks for stuff like managing your work, your team, and your calendar, for running meetings, for sizing your team, for handling performance reviews, etc. And the writing is clear and concise enough.

But this is Andy Grove!  I expected something … more.  Deeper, more insightful, more sophisticated.  More.

Instead he serves up a breakfast factory.  And a sports team analogy.  Really?

What disappointed me most was the total absence of any discussion of managing research and development work which is inherently more creative, less structured and less predictable than manufacturing.  Yes, some of the principles of manufacturing can be applied to R&D activities, but they have their own unique characteristics and challenges.  Intel does a huge amount of R&D so why Grove ignored this part of his company and his own experience is beyond me.  

But I think it’s his approach to dealing with people that kills this book for me.  Too much of the book seems to be written under the assumption that team members are fungible assets and not human beings with individual needs and specialized skills.  I found the chapter on motivation to be especially weak,  At one point he says,

“Fear won’t work as well with computer architects as with galley slaves; hence, new approaches to motivation are needed.  [p. 159]

Yeah, it was so much easier back in Roman times.  Later, after introducing Maslow’s hierarchy, he says,

“Simply put, if we are to create and maintain a high degree of motivations, we must keep some needs unsatisfied at all times.”  [p.159]  

Let’s keep everyone just a little bit hungry.  How enlightened! 

I’ve never managed a large team, let alone an organization of hundreds or thousands of people, but I’m sure we can do better than that. 

What about creating an environment in which people can grow, flourish and fulfill their needs in a way that also helps the organization achieve its goals? 

You won’t find anything like that in High Output Management.

If you’ve never read anything about management or leadership, there are better books. And if you’re looking to dive deeper into specific management topics, there are better books.  Here are some that I’ve read recently:  

  • Radical Candor by Kim Scott (review) is aimed at helping you be a better boss.  It provides simple, nuts-and-bolts advice for giving guidance, building teams and getting results.  
  • Principles by Ray Dalio (review) is mostly about personal development. It’s a hierarchically organized set of a couple of hundred heuristics refined over Dalio’s forty year career that are designed to help you get the most out of your life and work.
  • Crucial Conversations by Kerry Patterson, Joseph Grenny, Ron McMillan and Al Switzler (review) is about how to hold high-stakes, emotionally-loaded conversations where opinions differ. Performance reviews, giving tough feedback, a frank talk with your mother — those sorts of conversations.  
  • Dare to Lead by Brené Brown (review).  Leadership requires courage, and courage requires vulnerability.  Dare to Lead helps you develop the courage to lead in the full knowledge and acceptance of our own vulnerability.

They overlap quite a bit, so you don’t need to read them all, but they each have something unique to offer. 

Related Links

Ted Talk:  Why the secret to success is setting the right goals by John Doerr who worked with Andy Grove at Intel and later convinced Google’s founders to adopt OKRs.

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More From Less

More From Less
By Andrew McAfee
Scribner, New York, 2019

More From Less is a book about dematerialization

Demawhat

No, it’s not some sort of Star Trek transporter technology. Dematerialization is the phenomenon of producing the same goods from less material and energy. It’s real, it’s important, and Andrew McAfee thinks it can help save the planet.

McAfee is a principal research scientist at MIT.  He’s the co-author, with Erik Brynjolfsson, of The Second Machine Age (review) which I hugely enjoyed and highly recommend, and a business-focused follow-up book, Machine Platform Crowd (review).

To understand dematerialization, consider the humble soda can.  When I was a kid growing up in Canada, soda cans (we called them pop cans) were made of three parts: a rectangular piece of aluminum rolled into a cylinder with a seam joining the edges, plus a top and a bottom that were attached to the cylinder.  Today’s soda cans are quite different.  Grab one out of your fridge and you’ll notice the cylinder and the bottom are all one piece. There’s no seam. Only the top needs to be attached.  And the metal is a lot thinner than it used to be.  Back in the early 1960’s aluminum cans weighed about 85 g, according to data from the book.  By 2011 they weighed just 12.75 g. We now use about 80% less metal – less material — to make a can. 

Now soda can makers haven’t done this out of the goodness of their hearts.  They’ve done it to cut costs.  But using less material is good for the environment too. 

A subtler example: your smartphone.  Obviously, it’s a phone.  But it’s also a watch, a flashlight, a radio, a music player, a tape recorder, a camcorder, a newspaper, a compass, a magnifying glass and a whole pile of other things too.  The smartphone replaces them all.  You don’t need to buy those things anymore.

Finally, using less energy overall, and more renewable energy is yet another kind of dematerialization where material energy sources like coal, oil and gas are replaced by non-material sources like wind and sunlight.

McAfee says dematerialization occurs in four ways: 

  • Slim:  Use less material to make the same goods, like aluminum soda cans.
  • Swap:  Substitute new materials for more expensive or more damaging materials, such as switching from coal and oil to natural gas or renewables for electricity generation. 
  • Optimize:  Make better, more efficient use of the materials you already have so you don’t need to buy more, which explains why you rarely see empty seats on airplanes anymore.
  • Evaporate:  Replace materials with nothing at all, like your smartphone does.

Dematerialization is hugely beneficial both economically and environmentally.

Here’s where it gets interesting:  McAfee argues that the American economy has reached a point where GDP can keep growing without a corresponding increase in the amount of resources we’re consuming.  This is called decoupling

“With the help of innovation and new technologies, economic growth in America and other rich countries – growth in all of the wants and needs that we spend money on – has become decoupled from resource consumption.  This is a recent development and a profound one.”  [p. 109]

Profound indeed!  If dematerialization and decoupling are both happening at the scale McAfee claims, then we don’t need to worry so much about catastrophic Malthusian scenarios where we run out of essential resources.  Even climate change becomes a little less threatening if we’re actually using less material and energy to produce the goods we need and want. 

But are we?

McAfee presents convincing evidence that relative dematerialization is widespread. Making the same item with less material than before, like a soda can, is relative dematerialization. But if demand for soda keeps increasing and we make more and more cans, pretty soon the savings from dematerialization (and from recycling) will be outweighed by all the additional cans.  In absolute terms we’ll still be consuming more aluminum.  Similarly, while your smartphone replaces a knapsack full of other devices, if you buy a new one every year or two are you actually dematerializing in total?

Now zoom out from a single product to an entire economy.  Relative dematerialization occurs when total material and energy consumption is growing more slowly than the economy as a whole.  Absolute dematerialization would occur If material and energy consumption remained flat or better yet declined while the economy kept growing.  Then we would truly be making more from less and growth would truly be decoupled from resource consumption. 

Can we really achieve absolute dematerialization?  Even while population growth and rising demand, especially from developing countries, continue to drive consumption of more and more goods?

McAfee walks us through data showing absolute dematerialization in the US for some important materials like aluminum, copper, steel, gold, crop land, and even energy.  This is critically important: the data shows that total US consumption of these materials has peaked, in some cases as far back as the year 2000 and has been steadily declining.  His startling conclusion is that the US economy is now experiencing absolute dematerialization and so are some European countries.    

Contrary to those who say we need to radically restructure our world to move away from a model based on economic growth, McAfee says we need to encourage growth, particularly in developing countries, to help them get to the stage where their economies also move past “peak stuff” and start to dematerialize. 

“… instead of worrying about the world’s poor becoming richer, we should instead be helping them upgrade economically as much and as quickly as possible.  Not only is it the morally correct thing to do, it’s also the smart move for our planet.”  [p. 237]

His approach is fundamentally market based.  He devotes several chapters of the book to a vigorous defense of markets, capitalism and technology while acknowledging their historical sins and short comings.  If you’ve read Stephen Pinker’s Enlightenment Now (review) this will be familiar ground. 

Now McAfee isn’t saying we’re out of the woods, especially on climate change, pollution and endangered species.  Nor is he claiming that dematerialization alone is a panacea for the world’s environmental problems. Responsive government and public awareness also play an important role in dealing with the nasty side-effects — economists call them “negative externalities” – of economic activity.  He advocates measures such as pricing carbon emissions, either through a carbon tax or a cap and trade system. 

McAfee’s main idea in More From Less is that capitalism, technological progress, responsive government and public awareness – what he calls the four horsemen of the optimist – have already brought about absolute dematerialization in the US, and that given time, they can do it globally so that we humans “tread more lightly on the planet.” 

Unsolicited Feedback

The optimist (and the capitalist) in me really wants to believe McAfee is correct, but some alarm bells are going off in my head.    

Just before reading More From Less I read Vaclav Smil’s mammoth book Growth: From Microorganisms to Megacities (review). Smil throws cold water on decoupling and absolute dematerialization.

“Decoupling economic growth from energy and material inputs contradicts physical laws:  basic needs for food, shelter, education and employment for the additional billions of people to be added by 2100 will alone demand substantial energy flows and material inputs.  True, those inputs will have lower relative intensities … but the absolute totals will keep rising (with continued population growth) or will moderate but remain substantial.”  [Growth, p. 492]

And he cites a paper by James Ward of the University of South Australia and his associates called Is Decoupling GDP Growth From Environmental Impact Possible?  The paper concludes that,

“… growth in GDP ultimately cannot plausibly be decoupled from growth in material and energy use, demonstrating categorically that GDP growth cannot be sustained indefinitely.”

On the other hand, McAfee cites a couple of papers that support his position on dematerialization (see Related Links below).  So the question of whether absolute dematerialization is possible, let alone whether it can be achieved worldwide, is by no means settled.

Now I’m particularly concerned about climate change.  On that front there are some encouraging signs like this report showing that global electricity generation from coal is set to decline by 3% in 2019, its largest drop ever, and this article talking about the increasingly important role of utility-scale batteries for energy storage. 

But even if we assume for the moment that McAfee is correct and that the world is on track to achieve dematerialization at global scale, it is not clear that we will get there in time to avoid the worst effects of climate change.  In fact, the United Nations 2019 Emissions Gap Report warns that,

“GHG emissions continue to rise, despite scientific warnings and political commitments.”  [Executive Summary, p. iv]

And further,

“There is no sign of GHG emissions peaking in the next few years…” [Executive Summary, p. v]

McAfee recognizes the dangers of climate change and I think he makes some sensible recommendations as well as some controversial ones like using more nuclear power.  But we’re facing a time constraint.  I don’t think we have time to simply let economic development play out at its current pace. I think we’re going to need more aggressive policy measures. And we’ll need international cooperation and leadership to achieve them. I didn’t find that sense of urgency in More From Less and I think that’s a gap in the book.

Still dematerialization is happening.  Whether it is happening fast enough or widely enough may be open for debate, but More From Less is an important book worth reading.  McAfee’s passion for the subject comes through in his engaging, well-paced writing.

I hope Andrew McAfee is right, but I’m not quite convinced. I plan to read more and blog more about this.

Related Links

a16z Podcast: The Environment, Capitalism, Technology
Marc Andreessen and Sonal Chokshi interview Andrew McAfee

The Return of Nature – How Technology Liberates the Environment by Jesse Ausubel
This 2015 paper provided the inspiration for More From Less

Peak Stuff by Chris Goodall
A complimentary paper from 2011 about dematerialization in the UK.

Is Decoupling GDP Growth from Environmental Impact Possible? by James. D. Ward and associates. This paper says “no”.

Posted in Books, Energy, Environment, Science and technology | Tagged , , , , , , , | 4 Comments

Growth

Growth:  From Microorganisms to Megacities
By Vaclav Smil
The MIT Press, Cambridge, Massachusetts, 2019

People used to think growth was a good thing.  Politicians, economists and business leaders brag about healthy or robust growth in jobs, GDP, and profits.  But that’s changing.  These days, growth is often described as excessive, uncontrollable, and unsustainable. 

In her speech to the United Nations Climate Action Summit in New York on September 23, 2019, Swedish activist Greta Thunberg scolded world leaders with these words:

“We are in the beginning of a mass extinction, and all you can talk about is money and fairy tales of eternal economic growth.  How dare you!”

Growth’s reputation has become tarnished.

Can the world economy keep growing as it has for the past two hundred years?  Can we transition to a more sustainable form of growth?  How do we enable people in developing regions to enjoy the comforts and consumption that typically come with economic growth?  Can we do any of these things while living within planetary boundaries?

Into this debate, Vaclav Smil drops a 600-page tome, Growth:  From Microorganisms to Megacities.

Vaclav Smil might be the most important scientist you’ve never heard of.  He is Distinguished Professor Emeritus at the University of Manitoba in Winnipeg, Canada.  He’s a multidisciplinary scholar with interests in environment, population growth, food, economics and public policy.  But he’s mainly known as one of the world’s foremost thinkers about energy in all its forms, uses and impacts. 

To give you an idea of Smil’s influence, Bill Gates says, “There is no author whose books I look forward to more than Vaclav Smil.” 

Growth is his latest book, his 40th.  From the outset, Smil sets himself a gargantuan task; to examine the nature of growth in living organismsms, human-made artifacts and complex systems.  Literally, growth from microorganisms to megacities. 

He looks at the growth trajectories of individual specimens and whole populations.  He tries to take a long term view, looking back as far as he can within the limits of available high quality data.  In some cases he also makes projections, extrapolating from historical trends, but he is careful to provide a range of possible outcomes.  He is deeply skeptical of anyone predicting revolutionary change on time scales not supported by historical evidence, for example, rapid replacement of fossil fuels with renewable energy sources. 

Above all he avoids making rigid prescriptions.  But the takeaway message of his book is clear:

“… before it is too late, we should embark in earnest on the most fundamental existential (and truly revolutionary) task facing modern civilization, that of making any future growth compatible with the long-term preservation of the only biosphere we have.”  [p. xxv]

Growth has six chapters.  In the first, Smil looks at the types of growth, their trajectories and outcomes.  It’s essentially the mathematics of growth. 

Chapter 2 covers the growth of living matter: microorganisms, crops, forests, animals, and humans.

Chapter 3 is about energy – Smil’s special area of expertise – and how it is both the source and object of growth.  It seems like a digression, but it’s key to the remainder of the book.  

In Chapter 4, Smil examines the growth of human-made artifacts.  First, he looks at improvements in their performance characteristics such as the growth over time in the lifting capacities of pullies and cranes.  Second, he traces the adoption of tools and technologies, for example, the spread of smartphones around the world.

Chapter 5 is devoted to studying the historical growth of our most complex structures: human populations, cities and economies. 

Finally, in Chapter 6, Smil tries to forecast what comes after growth.  What happens when growth in an organism, a technology, or an economy stops, plateaus or even collapses? 

Rather than summarize each chapter, I’m going to focus on a few of the topics and themes that I found most interesting.    

Types of Growth

Growth is always measured over some time period be it days or millennia.

There are two main types of growth; linear and exponential, according to Smil.  Linear growth occurs by a constant amount in each unit of time and can be plotted on a graph as a straight line.  The growth of stalagmites on a cave floor over centuries is typically linear.  With exponential growth, the quantity increases at the same rate in every unit of time.  Graphs of exponential growth show a slow gradual rise followed by a rapid upward-sloping “hockey stick” curve.   Human population growth since about 1800 has been roughly exponential. 

Exponential growth is always temporary.  Smil advises us to distrust any forecast that includes an assumption of indefinite exponential growth.

There’s an intermediate form of growth which Smill calls “confined” growth or growth within limits.  A graph of confined growth looks like an S-curve.  (It’s technically called a logistic curve.)  There’s a slow rise at the beginning, a period of temporary exponential growth followed by a leveling off to flat or slow growth again.  Adoption of new technologies follows this pattern.  When smartphones were first introduced, they were expensive and buggy and only technology enthusiasts bought them.  Then they took off, especially after the introduction of the Apple iPhone. Now almost everyone has one.  Further adoption of smartphones will be slower since the market is already saturated in most parts of the world.

Smil shows how this pattern of confined growth following a logistic curve occurs again and again throughout nature and throughout history.  He warns repeatedly not to expect growth rates or growth patterns that are not supported by historical evidence.  Don’t count on a sudden spurt in crop yields for example, when historical data shows linear growth. 

Energy and Growth

Smil says that energy is the foundation for all growth. 

Sunlight is of course the primary source of energy on Earth.  Even fossil fuels are just sunlight stored millennia ago in plant matter.  Every living organism converts sunlight, either directly or indirectly, into the energy it needs to survive and grow.  Smil distinguishes between two types of energy “converters.” 

Primary energy converters convert natural renewable energy flows like sunlight, wind, water, plus fossil fuels, into more useful forms of energy like thermal (heat), kinetic (mechanical e.g. rotational), light and increasingly into electricity.  Examples of primary energy converters include waterwheels, windmills, steam engines, internal combustion engines, photovoltaic cells, and nuclear reactors.   

Secondary energy converters usually take electricity and convert it into mechanical energy (electric motors) or lighting.

The growth of human civilization is essentially the story of us getting better at converting more energy more efficiently into more useful forms. 

Population Growth

Smil traces the growth of human population from the first emergence of homo sapiens about 190,000 years ago to today.  Rapid population growth only began following the adoption of agriculture at various times around the world, starting 11,000 – 12,000 years ago in the Middle East.  Exponential population growth really kicked off after 1850 following the Industrial Revolution. 

Ever since, population growth has been accompanied by dire predictions of famine, most notably by the English scholar Thomas Malthus who predicted that population growth would always exceed our capacity to produce enough food for everyone.

Modern-day Malthusians such as the Club of Rome and Paul R. Ehrlich predicted famines in the 1970’s leading to the deaths of hundreds of millions of people. 

“That was a spectacularly wrong prediction.  Between 1968 and 2017 the world’s population more than doubled (from 3.5 to 7.5 billion) and yet by 2015 the total number of malnourished people had declined to fewer than 800 million or just below 13% of the world population compared to more than 23% a quarter century before …” [p. 315]

In fact, population growth rates peaked between 1962 and 1969 and began to level off in a typical S-curve pattern.  This is because we’ve undergone a “demographic transition” from high birth rates and high death rates with low overall population increases to a new equilibrium with low birth rates and low death rates resulting in low natural increase or even population declines in some places such as Japan and Europe. 

Still, our overall population is growing.  How long will that last?  When will population peak and at what level?  Smil says that long range forecasting is an “inherently uncertain enterprise”.  He cites projections for global population in 2100 that vary from 10 billion to 22 billion.  Perhaps wisely, Smil does not say what he himself thinks the population will be at that time but he does warn:

“Malthus’s basic assumption is unassailable:  the power of population growth is indeed much greater than the capacity to produce adequate subsistence – but that applies only when, as he correctly stated, the population growth is unchecked.”  [p. 317]

Environmental Impacts of Growth

There is no chapter or section of the book specifically dedicated to the environmental impacts of growth, especially climate change, but it is a recurring theme. 

Smil tells us that traditional economies relied on biomasss for energy (burning wood, straw, charcoal, and dung) and on human and animal labor supplemented by small amounts of water and wind power.  We broke out of these energy constraints during the Industrial Revolution through the burning of fossil fuels, starting with coal and later adding petroleum and natural gas.  He notes the irony of escaping the limitations of consuming the products of photosynthesis by consuming “stockpiles” of past photosynthesis. 

These new sources of energy enabled the advances of the past 200 years, but at considerable cost to the environment including deforestation, soil erosion, biodiversity loss, and of greatest concern, climate change. Since 1850, Smil says, we have emitted almost 300 Gt (that’s 300 billion metric tons) of fossil carbon into the air, driving atmospheric concentrations of CO2 from 225 ppm to 415 ppm at the end of 2017.  [p. 448]

We have made some progress though.  The US has reduced CO2 emissions faster than Germany primarily by switching from coal to natural gas for electricity generation, for example.  And we’re making more stuff with less raw materials, a phenomenon known as “dematerialization.”  However,

“… there is no doubt that since 1973 (when the unprecedented period of rapid post-WWII growth ended) the world economy has become impressively more energy efficient and relatively less material-intensive – while continuing population growth, further increases of consumption in affluent countries, and fast economic advances in Asia in general, and in China in particular, have translated into relatively strong absolute global growth in both energy and material requirements.”  [p. 496]

In other words, the tide has not yet turned. 

A Post-Growth World?

Many people believe that in order to stop the most harmful effects of climate change we must fundamentally restructure our societies and especially our economies.  They believe we need to put an end to our obsession with growth, that sustainability and growth are fundamentally incompatible, and that we need to live and work, produce and consume in ways that do not depend on growth.   

Smil looks at this question towards the end of the book.  He’s not very encouraging, mainly because we have so little past experience to go on.

“… no modern society has been taking any thoughtful, effective steps to find its way to deliberately very low or no growth even in settings where a relatively high level of average affluence and obviously excessive levels of consumption and waste are all too evident.”  [p. 498]

Japan is a harbinger. Its population has already begun declining.  Smil predicts Japan will become the first truly geriatric society.  Yet Japan’s economy is still growing slowly.   

Economists are apparently not much help because economic model assume continuous growth supported by technological innovation. And “techno-optimists” believe that dematerialization will enable wealth creation to gradually separate from demand for energy and materials.

Smil is deeply skeptical of any such claims.  He acknowledges progress in relative dematerialization: individual artifacts can be produced with less materials and energy.  But as long as population keeps increasing there will be no absolute dematerialization.  Total demand for energy and materials will keep rising.

He cites research that concludes:

“… growth in GDP ultimately cannot plausibly be decoupled from growth in material and energy use, demonstrating categorically that GDP growth cannot be sustained indefinitely.”  [p. 492]

Smil refers to different economic thinking by economist Kenneth Boulding who suggested we need to move from a “cowboy economy” where unlimited resources can be recklessly exploited towards a “spaceman economy” where the earth is s spaceship with no unlimited resources.   

Of course it is impossible to predict how long we can continue on our present path, or what exactly the outcome will be. 

“Ultimately it comes down to the biosphere’s capacity to support an expanding population consuming at higher rates.”  [p. 502]

But, echoing Greta Thunberg, Smil says,

“Continuous material growth, based on ever greater extraction of the Earth’s inorganic and organic resources and on increased degradation of the biosphere’s finite stocks and services, is impossible.”  [p. 511]

Good life within planetary boundaries is possible, he says, but not without a fundamental restructuring of how we produce and consume.  And we have no time to waste.  Smil concludes the book with:

“I believe that a fundamental departure from the long-established pattern of maximizing growth and promoting material consumption cannot be delayed by another century and that before 2100 modern civilization will have to make major steps towards ensuring the long term habitability of its biosphere.”  [p. 513]

Unsolicited Feedback

Growth was a long and difficult book (leading to a long and difficult review – thanks for sticking with me!).  As you can probably tell from the quotes, Smil’s writing is dry, dense and academic, although he does get a little snarky once in a while. 

Growth is at heart an academic work.  It’s a magnum opus on the subject of growth.  I’m in awe of the breadth of its scope and the depth of its scholarship.  The book is insanely well-researched.  Practically every paragraph in its 513 pages contains one or more academic citations.  The References section runs an additional 100 pages. 

I did not read every word of it.  I skimmed over topics that I was less interested in. 

The overall message of Growth is sobering, especially for a “techno-optimist” like me.  Indefinite exponential growth is impossible.  We cannot predict when or how growth will come to an end, only that it will end if we continue on our present trajectory.  We have few guideposts and very little experience for how to move towards a low- or no-growth civilization.  But we must act quickly to avoid catastrophic degradation of the biosphere. 

These conclusions aren’t new or unique to Smil.  So why did he write such a massive, sprawling book? 

Perhaps Growth’s most important contribution is to shed light on recurring patterns that span the natural and human-made worlds.  It’s an evidence-backed antidote for anyone proposing quick technical fixes or “this-time-it-will-be-different” forecasts.   

But in the end it left me unsatisfied.  Smil draws useful boundaries around how to address the problem of growth but he doesn’t make specific prescriptions or even suggest general approaches that he thinks might work or could be worth trying.  Maybe he feels that’s not his job, or that he would just be speculating.  Still I found this is the most disappointing aspect of the book.

Related Links

Vaclav Smil:  Growth must end — interview with Vaclav Smil in The Guardian
https://www.theguardian.com/books/2019/sep/21/vaclav-smil-interview-growth-must-end-economists

Posted in Books, Energy, Environment, History, Science and technology | Tagged , , , , , , , , | 4 Comments