The False Choice of Grid Parity

One of the things I've learned the most from business school is the power of false choices.  By that, I mean the idea that there is a fixed set of options to choose from.  While some professors like to force MBA students into choosing one option out of three, in the real world there is usually a much larger set of possibilities and the most successful of us will be able to ask the right questions to ascertain the full set of options and choose our option with a full understanding and value of the possibilities.

I attended the ARPA-E energy innovations summit last week.  ARPA-E is under the DOE and funds early stage research and companies in clean tech.  There were over 100 "companies" (some were universities/one person/etc) that exhibited and many of the solar companies had banners that said something to the effect of "we can do this at 10 cents a kWh".  I didn't get into what if they had compromised their tech or their supply chain or if it simply wasn't true but I imagine it was at least one of the three. 

The problem is that everyone is racing to the 10 cent solution.  But what this recent Harvard study shows us is that coal is likely not even the cheapest form of electricity that we have, it's just that we are willing to pay for it with negative externalities like childhood asthma. http://inhabitat.com/harvard-study-reveals-coal-energy-to-be-one-of-the-most-expensive-forms-of-power/

I would argue that grid parity is also somewhat of a false choice.  By that I mean it's not just either we have solar at 10 cents or coal/nat gas at 10 cents and no other reality is possible.  What if we relied on true cost accounting to determine the price of our electricity?  If we factored in the negative externalities of fossil fuels, most renewables would likely be at grid parity right now.  

At the same time I understand the argument that increasing the cost of electricity affects the poor in a greater proportion than the wealthy, much like a sales tax.  However, the negative health and environmental impacts of fossil fuels also have a greater financial and social impact on the world's poor. 

In the end, the best thing we can do is tax what we don't want.  While incentives and subsidies are a compromise until the true cost of fossil fuels is clear to the consumer it will continue to be difficult for clean tech to grow to the size we need it. 

Not being the smartest MBA

Mark Yusko, who manages Morgan Creek Capital Partners with 10B in assets under management came to speak to our Private Equity class a couple of weeks ago. He's the ultimate contrarian and has a lot of interesting opinions on the state of the U.S. and global economy.  He considers the U.S. a submerging market along with much of Europe and Japan. 

He had a great line of questioning for the large group of MBA's in attendance that relates strongly to investing:

1) How many of you think you're in the top quartile of intelligence in the room?

2) How many of you think you're in the top quartile for looks in the room?

3) How many of you think you're in the top quartile for height in the room?

He said for the first question about 85% would say yes for number two about 60% and for number three about 50% even though you can look around and know if it's true or not. 

That's stuck with me for the past couple of weeks.  I think one of the things I've learned the most in business school is the need to really understand one's strengths and how they add value.  It's important to leverage those strengths to also generate confidence in your work but not to let your ego allow you to think there's more to you than there really is. 

When investing time or money it's important to be able to gauge your own ability and work from there.

Education doesn't "do" enough

Before coming back to school for my MBA I taught 5th and 6th graders outside, mostly in National Parks.  It was always stunning how few of them had really experienced the natural world.  In fact, it was kind of depressing.  What's worse is that I fear many of them, much like most MBA's, don't "do" enough in the classroom. 

We sit, we "listen", we occasionally say something smart, and then we go back to checking our blackberry or daydreaming depending on our age.  I can count the number of impactful experiences I've had in the business school classroom on one hand.  Honestly, that's fine with me because I've done plenty of experiential learning outside the classroom and will continue to do so once employed because I'm to the point that I understand that is how I learn the best.  The problem is that many people don't, especially 5th graders.

So how do we build experiential learning into a curriculm filled with standarized testing?  In a way, we're trying to catch up to China and India's math and science skills. (Check out Freakonomics for some interesting facts about how kids there go to school for 1.5x the time that kids here go to for and then you understand a piece of the gap)  We'll never get there. I haven't seen "waiting for superman" yet but I know they talk about American students being the most confident in being smart even though we rank like 35th.  And many of my friends and wife have talked about how bad that is. 

I argue that is what America's entrepreneurial culture has been built on.  It's that belief that we can do things others see as impossible that's made our country what it is.  That understanding of our true capability doesn't come from a standized test, it comes from rapid prototyping and getting something real out to the world.  Kids don't often do that in school, but they increasingly have the opportunity and tools to do it on the internet.  As those two merge it's going to be interesting to see what happens. 

Design Thinking workshop with IDEO

Here are some takeaways from the design thinking workshop I did at Net Impact:

*Defering judgement helps build trust

*When designing something, start with desirability

*Try to find the extreme users of things to understand the possibilities that may exist for that product or new products

* Frame questions in a way that encourages people to tell stories and doesn't lead people in a specific direction.  For example, why don't you brush your teeth?  would be a leading question where as Can you tell me about how you take care of your teeth?  might help you get a better idea of how to solve the problem. 

* People appreciate someone that really listens to them

* Innovation requires one to follow a disciplined process

In many ways design thinking is complementary to business thinking if you can slow down the business brain enough.  Many will say they are opposite but I would argue it's just a different process that uses many of the same filters of decision making just in a different time frame.  I think the hardest thing about it is waiting to solve the problem.  With design thinking the solution comes weeks after the initial challenge has been discussed.  In business thinking we are taught to solve the problem as quickly as possible and rarely question the question.  However, I would argue that these two disclipines are beginning to merge as each side sees the value in the other.

Net Impact 2010 Michigan

Some other interesting random facts from the National Net Impact Conference:

*There are now more people on earth with mobile phones than toilets

*SOCAP is going to do a conference in D.C. with Hillary Clinton

*USAID spends $26B a year in 90 countries