The Green Gap

In the Cold War, we feared a Missile Gap was a strategic weakness. Nowadays, we must awaken to the fact that the Green Gap is true strategic weakness: the nations whose economies will thrive in the coming years will not be those with the biggest factories, but those with the most sustainable, efficient, and ecological markets. What we require is a Strategic "Green Reserve" of ecological design to weather the coming changes that both climate and resource scarcity will force on the international economy.

Sunday, 29 May 2011

Time to Abolish Mathematics

Dr. Gord Hamilton discusses why we should abolish mathematics in elementary education.

Gord is a game designer, Math proselytiser, and all-round genius. What do you think?

Saturday, 28 May 2011

China's Water Woes

This year could be a bad year for Chinese crops due to drought, but other things get affected by a lack of water, namely: hydropower projects. Of which, China has the biggest in the world.
Total capacity at the Three Gorges hydropower project amounts to 18.2 gigawatts, the equivalent of about 15 third-generation nuclear reactors and more than a third of Hubei's total. It generated 84.4 billion kilowatt-hours of electricity in 2010, delivering power as far afield as Shanghai on the eastern coast.
On June 10, the water will be so low that they will have to stop discharges. Now, imagine pulling 15 nuclear reactors off the grid all at once in a country whose industry is already facing severe power shortages. A very telling quote from one of the linked articles states:
Power deficits in the 26 provinces and regions serviced by State Grid Corporation of China would total 30 gigawatts in the summer, even if coal supplies remained steady, water levels were normal and there were no persistent high temperatures.
So they are going to be short 30 gigawatts even if the Three Gorges Dam keeps running - which, as of June 10, it will not - and if coal supply keeps steady - which, if these reports are to be believed, is not the actual problem facing coal generation. Coal plants are running out of money in China because they are getting squeezed by electricity price controls on one hand and the rising price of coal on the other.

The drought is not a new story. Since mainstream media has the attention-span of a ferret, the story seems well nigh ancient. Yunnan, in the far south, has been affected. The Yangtze river basin, too, has been badly affected... but the antecedents go back for years:
China's north has been suffering from a lack of rain for nearly 15 years -- largely attributed to global warming -- while the south, especially the Yangtze river basin, has been prone to flooding during the annual summer rainy season.
So the Yangtze is experiencing extreme weather in line with global warming predictions, and this has been happening for 15 years. Now, the drying has gotten so extreme that even though the Yangtze flooded mid last year, it's now running far drier than before.

So what do we take away from this? A few things. The Chinese will need to buy rice and wheat this year, probably in record amounts. In order to do so, they may allow the yuan to appreciate in value. China may not be able to hold back the tide of inflation, a beast that has been licking its chops for years waiting to pounce on the Chinese consumer. Food prices will absolutely increase. If this is all combined with a fuel price shock, there will be dire problems in the Heavenly Kingdom. Not saying a fuel shortage will happen, but it could, given the volatile market. I'm not a betting man, but I do believe in Murphy's Law. Fuel could have a deep impact in this situation.

The further complicating factor regarding fuel is the transportation infrastructure. Transport monopolies/oligopolies in China are forcing a great deal of produce to remain in the fields because farmers spend all their profit on transportation and because produce prices have dropped. Transport companies can't make a profit margin unless they haul illegally, because road tolls are so steep. If a fuel price fluctuation jumped into that margin, trucking companies would make more money by closing shop. Farmers everywhere, it seems, are damned if they do and damned if they don't. An interesting aside: road tolls are, of course, provincial matters. Even though the central government wants to reduce them, the final decision rests in the provinces. China has had this same centre-versus-periphery problem for five thousand years. It's not going away just because of some measly nation-threatening drought... it's a tradition!

All my Chinese friends: if you can take a vacation somewhere with wheat, I highly recommend you do so for the rest of the summer. As a matter of fact, you should take an Alberta Break. By July, the Yuan will probably have been upgraded in value so you'll probably be able to buy a few extra steaks for your money before you head home for Autumn. Take it easy guys, we don't know exactly what the government is going to do to fight the inflation, but knowing China, it will be massive and centralised. I imagine they may just try to buy the Ukraine.

Thursday, 26 May 2011

More on Water

The New Scientist has something to say about water and national policy:

Take Saudi Arabia, for instance. Between 2004 and 2009, it leased 376,000 hectares of land in Sudan to grow wheat and rice. At the same time the country cut back on wheat production on home soil, which is irrigated with water from aquifers that are no longer replenished - a finite resource.

Meanwhile, firms from China and India have leased hundreds of thousands of hectares of farmland in Ethiopia. Both China and India have well-developed irrigation systems, but Woodhouse says their further development - moving water from the water-rich south to northern China, for instance - is likely to be more costly than leasing land in Africa, making the land-grab a tempting option.

The article is a good, short read, but underscores my contention that water and food are strategic resources. This summer, let's see how the Chinese wheat crop fares...

Monday, 23 May 2011

True Cost Accounting and Utilities

Let's say you work at a job where you are paid $24,000 a year to make widgets.

The problem is that your commute to work costs too much money. You report to your supervisor and say "Hey Steve, I need some kind of help to pay for my commute costs. I spend $400 bucks on gas each month and it's eating into my salary something awful!"

Steve replies, "Yeah, a lot of other people have been noticing that, so the company has decided to open up a staff gas station. If you buy gas at the station, then it will only cost you $200 per month, and you should have more of your paycheque left over at the end of the month."

"Great!" you say, and walk happily out of Steve's office.

Sure enough, the company has built a brand new gas station right in the company parking lot. It's not exactly under the umbrella of your widget factory, so it pays rent to the widget factory for the space in the parking lot it takes up, and buys its gas by itself. It's a real honest to goodness gas station... it just happens to charge less for gas. You fill up your tank, and sure enough, instead of costing $40 bucks per tank, it costs $20. You're pleased with yourself as you walk into the office and give Steve a high-five. Life is good.

Your paycheque comes around, and you notice a problem. Instead of being $2000, it's $1700. There's some entry on there that says "Energy costs" and they've docked you a full $300 bucks for it. You storm into Steve's office to ask him what gives. Steve, who talks too much and doesn't know how to lie (it's why he's still your supervisor and not Vice President), tells you: "well, because the company is offering these rebates on fuel, we had to recoup costs somehow. It's about sharing the burden."

"But you docked me $300 bucks! I already paid $200 for gas, that's $500 total where before I used to pay $400!"

"Well, yeah," continued Steve, "it's cost sharing, so some people drive more than you and some dive less, but we all have to share the load equally, right? I mean, teamwork and all!"

You cast a sideways look at John, who drives his Humvee three hundred kilometres every day to the office and back. He shrinks under your gaze. Your blood starts to boil. You realise you're paying for his gas. But wait... not everyone has that kind of commute. The average amount of gas has to be about the same as you. There's no way that EVERYONE in the office uses that much fuel. You challenge Steve on his murky accounting.

"No, no, no..." says Steve, "that's not the total cost of the deduction. You see, in order to allow the gas company to make money, we decided to waive its rental fee for the lot where it's sitting. Since the company has to recover that cost somehow or another, we added that rental fee to the deduction."

By now, you're mad. "But that's just rent! There's no WAY that would come up to three hundred bucks!"

Steve doesn't break pace, explaining calmly and exasperatingly patiently: "well, there is more to it than that. You see, the gas is hard to control. In order to get the pumps here, we had to cut corners on some of our valves and switches. The truth is, the system is really hard to stop pumping, and there's very little capacity to store the actual gas itself onsite. The problem is that even if there isn't a car at the pump, the pump has to keep pumping for a little while because it has to be shut off at a completely different location. We lose about 9-10% of the gas that way... so we have to pay for that, too..."

Steam is gradually billowing out your ears.

"...and then there is the matter of upkeep of the equipment, payment for the gas itself, and the central administration of the program. We all have to work together to make the savings happen."

Now... let's stop this madness for a moment. What I was talking about wasn't actually gas... it's electricity. It's generated by central power stations and transmitted over wires to get to your house. In the process of transmission, there are current losses due to inefficiency of the system and the fact that some of the electricity has to be discharged. In the US in 2007, the total system loss was about 9%. Also, the system is administered (in the case of Alberta, for example) by a government-run agency: AESO. AESO has to pay for the construction of new electrical capacity in the form of grid improvements. The grid, after all, is a "public good" they say.

Who pays for AESO? Well, one way or another, the end user does. Either we're taxed to pay for it (Alberta spent $500+ million on utilities in 2009) or we're charged for it through end user fees. One way or another, we will pay - it just comes out of a different budget line. Even if you were completely off-grid, your Alberta provincial taxes and levies will go to pay for the grid. Even if you use extremely energy-efficient appliances, you still pay for the people who don't. There's also the question of the Alberta Utilities Commission, which is the administrative arm of the utilities issue.

So let's think about this. Per year, each household in Canada spent an average of $2204 in 2009 for utilities. That's not a small chunk of change. Over the life of, say, a photovoltaic panel (25 years plus), that would be $55100... not counting increases in utility prices. Also, a portion of your tax goes to pay for utilities without you being able to say anything about it... so if we were talking real cost of utilities, this amount of money would be higher.

A GigaJoule is about 278 kWh electricity. 140x278=38920.

If you had to replace all that heating and electricity with something like photvoltaics, that would be nigh impossible. A 30,000 kWh system costs about $150,000, and is huge in size. That kind of expenditure is just plain stupid. But what about using energy efficiency combined with local generation? For example, the PassivHaus specification states that a house cannot use more than 15kWh/m.sq. of heating per year. Since there are over 25000 houses in the world that meet this specification, it's possible. That's a grand total of 2787 kWh/year in heat for a 2000sq.ft. house. Calgary houses do not need air conditioners.

If we add the typical energy use (7453kWh) plus the heating (2787kWh) all of a sudden we have a much more manageable 10240kWh for a regular dwelling. That's doable within the budget for less than $30k in PV alone.Mix it up a bit with wind (ample in Alberta) and you could really pump out the juice for that price and make money back. Add 14% to the price of the house for PassivHaus certification, and you're off-grid. You can even save more energy, because with energy-saving appliances and the proper systems, you can be using far less electricity than a normal detached dwelling does. Don't forget to calculate in your $4500 rebate for energy efficiency. Plus you never suffer the cost of a price increase in fossil fuels again (or suffer the cost of simple inflation on energy prices).

Right now, in-situ generation seems to be only a break-even scenario, but the reduction in costs over all is far greater than the sum of its parts. That's because, like in our stupid gas example above, the actual cost of the grid, utility administration, and inefficiencies, are actually passed on in your tax dollar, not in your energy bill. Imagine Alberta no longer having to repair power lines? In Calgary, where the lines are underground, imagine the avoidance of repair costs... if you've ever seen a power line repair in Calgary, you know: they have to dig in under the asphalt to get at the wires and then patch the whole thing up again. It's labour intensive. What if we simply didn't have to pay for the grid anymore? It's possible. It costs less over all than the grid does, and it would actually create jobs for installers, repairmen, and retrofitters. I know that on the face of it the math just comes out about even out between the two scenarios over an amortisation of 25 years... but that's only because nobody counts the hidden costs that come at us in our tax bill rather than our electricity bill. With real cost accounting, and a full reckoning of system costs on your electricity bill, you'd be saving FAR more money with a home system. Now, just to make the government include all the costs in the bill rather than in hard-to-find nooks and crannies in your tax bill.

Sunday, 22 May 2011

Pee-Pee and Poo-Poo

I don't like pee-pee or poo-poo much, because they're yucky. I do have a weird fixation on them when it comes to sustainable living though. For some reason, sustainable sewage treatment really turns my crank. It's probably partly because I'm keen on getting stuff for free, but also because I'm not keen on throwing stuff out. Eat, crap, and flush is about the same linear process as make, use, waste. Linear sucks. It's not at all energy-efficient. Since pee-pee and poo-poo are the two most common wastes we humans have to deal with (they become less common when we don't have our fibre in the morning), I guess that's why I'm so fascinated with how to make use of them.

I got to thinking about building houses lately, and started costing out a geodesic dome. As an aside, I don't think there is much of a cost saving in building a dome over a long-house style greenhouse, but that's a topic for another day. To make a long story short. I discovered that a 20x100' long house at the back of four rowhouse units would be a rather clever dual use of foundation walls and would allow for the back wall of the greenhouse to be planted with strawberry towers or a folkewall style structure. It would also, depending on the cost of glazing, be less expensive than a geodesic dome... and a hell of a lot easier to build. Sorry, dome guys, I'm just not converted.

So, my main interest in this folkewall/strawberry tower thing would be the treatment of greywater. As you may or may not know, greywater is wastewater with little to no organics in it. It comes from washing machines, dishwashers, sinks, and showers, to name a few places. It's basically water that you would normally let wash down a drain that hasn't got any pee-pee or poo-poo in it. Earthships use in-house greywater filtration based on living machines. I envision a similar indoor greywater trough filled with air-cleaning plants along the south-facing wall of each unit, through which all greywater will filter. Soaps and their ilk will be cleaned out of the water by the micro-organisms around the plants' roots. The then cleaner greywater can be mixed with urine and run through the folkewall in a dilute form. But how to get the urine separate from the faeces?

Enter the low-flush urine diverting toilet. As you can see by following all the links, the idea is not a rarity anymore, and it appears there is even an economy of scale - the highest priced unit is around 800 bucks. These units can be hooked into a simple reservoir for urine, and then that urine can be pumped in a measured way into the greywater that's cleared the first filtration trough. The key to using urine in this way is that it needs to be diluted, and since it, well, smells like pee, you want to keep it in a sealed container... and I think applying it to the folkewall through vermiculite laced with biochar would probably be a good way to keep the place not smelling to Hliðskjálf . Luckily, the WHO has already thought about the safety of just such a proposition, and they explain how best to handle human waste in their (aptly named) "WHO GUIDELINES FOR THE SAFE USE OF WASTEWATER, EXCRETA AND GREYWATER" publication. Convenient. Plus, other people think about this stuff, too. You can see a whole host of links to urine in agriculture here.

Since urine is pretty pathogen-free, its direct use (after minimal treatment) is reasonably safe and efficient. The problem is the pathogen-laden faeces. Luckily, those diverting toilets can lead to numerous different local treatment systems. The low-volume flush means less water to become leachate, and allows for better composting of the waste in composting units. As you can see, composting toilets are now more or less mainstream; they've got commercially available systems for automatic composting of humanure. There are other systems that produce useful byproducts: the Anaerobic Baffled Reactor, Methane Digester, and Biogas Settler all produce biogas for use in stuff like gas ranges. I have noted previously that bubbling biogas through an algae bioreactor would make it sweeter by pulling some of the CO2 out of the mix.

The matured compost can be spread on fields, but it would probably be better to run it through several other digestive processes before doing so. Putting it through a vermiculture operation would be a no-brainer, as that should provide further bacteria and fungi to break down the already pretty broken down organic solids. By putting both urine and faeces back into the food production cycle, the macro and micronutrients that are normally flushed down the toilet go back into the soil and food system. That's a good thing, and it means we go from a linear eat-crap-flush system to a renewable cyclical system. That's good. That's pee-pee and poo-poo.

Saturday, 21 May 2011

Wages and Subsidies: the Sri Lankan Case

I was talking before about a simple model of an economy with food as the basic component. I had said "... food fuels labour, labour fuels industry, industry fuels growth, and growth fuels the economy". It's totally simplistic, but when it comes to economic models, simplicity can be a blessing. Since any population increases over time, that population needs to bring more land under cultivation and requires more inputs to increase production. The prices of those inputs (under the current industrial farming paradigm) sadly track oil prices, so the cost of cultivating more land more intensively fluctuates. The tendency, as with all non-renewable and scarce resources that are being extracted more and more intensively, is always that price increases over time.

Food cost is a major consideration for a huge proportion of the global population. Excepting we in the super-rich West, people tend to spend the largest part of their salary dollar on food. A tiny increase can be telling. I remember during the War in Sri Lanka when the cost of coconuts rose drastically. I remember saying at that time that it didn't matter how many southern Sri Lankan sons died in the conflict up north, the next election would be decided on the price of a coconut. Coconuts, being a staple food in Sri Lanka, were a daily necessity. The careful shredding and use of coconut meat in such delicious (and ubiquitous) foods as pol sambol:
...necessitated a constant supply. When the price went up, news programs were filled with stories of ladies going to the market to purchase half a coconut where before they had easily bought a whole one. First of all, my mouth is watering just looking at that picture of pol sambol (that is some GOOD food). Second of all, hunger is a primordial signal to the human body that something's wrong. If you're hungry, you're motivated. You can even say that euphemistically: if someone is "hungry" it means they have an objective in sight and will do anything in their power to get it. Hunger is one of the things that can create unrest, so it's to be avoided if at all possible.

How did this play out in Sri Lanka? Let's remember that this is a country terminally short on capital. The basic and fundamental source of the value of the Rupee was (and likely still is) foreign currency reserves sent home from the Gulf States where Sri Lankan women work as housemaids and men work predominately as cooks. Without this influx of capital, the Rupee would be utterly meaningless. As a matter of fact, I was completely unable to exchange Rupees for dollars anywhere outside Sri Lanka. The Sri Lankan government was always short on liquidity and paying for war materiel is expensive, so, on 21 July, 2007, Ag Minister Nanayakkara announced a program to expand food production through land grants. No money was available, but the government could give up land for production so long as the companies gave back profits and financed the industries themselves. Food (and fuel) imports, it was understood, bled the economy dry of foreign currency reserves:
Sri Lanka spent US $ 2 billion only for food product imports during 2006. The country spent the same amount of money on petroleum imports, a commodity that cannot be produced locally.
The problem with Sri Lanka, as with so many other developing nations, is that it is a victim, to a degree, of its mercantilist past as well as the IMF's idiotic focus on cash crops for the purposes of economic development. On little island, stuff has to be imported. Better it be luxuries than staples. Luxuries you can live without. Staples, not so much. Sri Lanka got it backwards, exporting tea and workers for food, and keeping wages low locally to keep more seats at the local cotton-gins.

The land-for-profit-sharing under Minister Nanayakkara clearly wasn't getting the desired results in the pipeline because in November of 2007, King Dutugemunu himself announced further subsidies for rice farming and an elimination of VAT on rice purchases. Another problem was the breakup of prime coconut land (which is predominantly also scenic coastal sandy territory) which was also solved by fiat:
The government was also planning to ban the break up of coconut land and putting them to alternative uses. There is a strong political lobby to prevent coconut land being in fast developing areas for purposes which generate a higher economic value.
Still, in early 2008:
Coconut production rose by 3.0 per cent during the year benefiting from favourable weather conditions but the prices of coconut and coconut based products increased sharply reflecting the world trend of increasing demand for organic oils to produce bio-fuel as a supplement to expensive fossil fuel.
The concept of coconut price going up in response to biofuel production is a canard. The Rajapakse regime maintained a very tight control on the media, and dissenting presses found their machinery sabotaged if they dared violate lèse majesté. Some journalists have even been kidnapped or shot and hacked to death for these violations - so when reading SL media be certain to take the pro-government bias with a pound of salt. The cause and effect are plain: coconut prices rising, reliance on foreign currency for war materiel as well as oil and food, government attempts to stem the conversion of coconut plantation to luxury hotels by fiat, further increases in price of coconut. Would there be a wage increase commensurate to the cost of food?

That the government is forced to stave off hunger by subsidising the increase of agricultural input and subsidising the cost of food seems like a really unsustainable idea. As a matter of fact, that's how it played out in SL. Sure, you can offset the costs for a little while, but in the end, you'll run out of money. The sad part about all of this is that the reason for keeping food costs artificially low is to maintain wage competitiveness. Wage competitiveness is all about luring industry, and industry comes not to better the country it sets up in, but to exploit lower operation costs. Labour is a major consideration. China has been a great beneficiary of this as well. I know another government that is running out of liquid capital due to war expenditures, but at least it produces its own food. How much of that food is bought locally? How much of the cheap food is imported? What if there was to be a sudden down-valuation of the US dollar that increased the cost of that low-cost food? The knock-on effects of relying on food imports and low wages are rather profound.

So, when we are talking about industrial inputs, we are talking about raw materials, labour, and energy costs. Labour is a huge cost in the developed world, and a portion of the cost of labour is the cost of labour's input: food. If food prices go up (which they basically must... food production is finite), then labour costs should go up. The only way to stop this from happening is to intervene artificially in how the market sets prices. When labour says they haven't got enough food to live, and industry says they haven't got enough money to pay salaries, should it be government's place to perpetuate the low cost of labour by subsidising food production? Should it be government's place to allow the weak corporations to survive? Should we let the exploitation of labour and government continue at the hands of industry?

We need to stop subsidies. In the end, many subsidies simply perpetuate bad business practices by enabling industry to keep the cost of labour low. That sends the wrong price signals, and bases our economy on a dream rather than reality. As we all know, dreams come to an end.

Sugata Mitra: The child-driven education | Video on

Sugata Mitra: The child-driven education | Video on

I'm in love with this guy. While the idea of simply letting kids run amok with computers doesn't really fulfil a lot of fundamental educational needs, this concept of self-organising systems and emergence as a source of self-powered education is wonderful.

Friday, 20 May 2011

Ecosystem Discovery: Top 10 plants to remove toxins from the interior o...

Ecosystem Discovery: Top 10 plants to remove toxins from the interior o...: "Indoor plants have proven a precious tool in the battle against the increase levels of indoor air pollution. Scientists from the NASA have f..."

This is totally useful. I need to save this link.

Thursday, 19 May 2011

Working... Working...

I noticed that my most recent post appeared with a date of last month. If you haven't seen it, it's right here.

I've been enjoying making greenhouse layouts lately. Mainly they are just fanciful.

But some are reasonable.
I'll keep at it for now. Designing the water flow in aquaponic systems in order to minimise the number of pumps needed is kind of fun.

Wednesday, 11 May 2011

Organic Farming in India

A marvellous article in the Guardian today on organic farming in India.

For all those addicted to fertiliser and pesticide, chew on this (to paraphrase):

First, there's a 10% to 20% premium to be earned by selling organic products abroad

Second, organic farming slashes cultivation and input costs by up to 70% due to the use of cheaper, natural products like manure instead of chemicals and fertilisers.

Third, western, modern farming has spoiled agriculture in the country. An overuse of chemicals has made land acidic and hard, which means it needs even more water to produce, which is costly.

Read the article, it's a perfect and pragmatic rebuttal to the need for fertiliser and pesticide. Those tools only help agricultural companies, not farmers.

Monday, 9 May 2011

Water and Food are Strategic Resources

When people talk about strategic resources, they typically mean a few bits of materiel reserved for use in the event of the outbreak of war: uranium, titanium, and oil lead the pack. Oil is the sine qua non of modern strategic resources. Without it, no military can operate. It has been so since the Second World War. But before the WWII there was a saying: "an army marches on its stomach". Did we forget that adage, or was it simply taken for granted that so long as we could fuel the lines of supply there would be enough food? The latter sounds right to me. Food is taken for granted, whereas before, it was central to military affairs. How now? Is food important as a strategic resource? Does its scarcity have the ability to destabilise populations? Are national policies put in place to control the distribution of and access to food? Yes, yes, and yes.

Recent events in the Middle East have pointed to a deep and abiding need for democratic reform. They are signs that grassroots populist movements can rise and demand regime change. But what methods are used to keep down these uprisings? Well, there seems to be a clear pattern:

2008 MAR: Yemen - "In March 2008, in the middle of a world food price crisis, the cost of wheat more than doubled in the space of four months, leading to weeks of protests and riots across the country. In the past two weeks, the price of wheat in Yemen has risen by 45 percent, and the cost of rice by 22 percent, according to the World Food Programme. The value of the Yemeni rial is also in decline, while the U.S. dollar is increasingly difficult to come by in the capital."
2008 JUN 16: World Bank gives Yemen $100M to lower food prices (the Houthi Rebellion has gone on since 2004, but aid came only after food riots in March)
2011 JAN 16: Kuwaiti Emir Sheikh Sabah al-Ahmad al-Sabah orders food distributed for free for 14 months. As of yet, no Kuwaiti uprising has materialised.
2011 JAN 20: Jordanian Prime Minister Samir Zaid al-Rifai announces increased subsidies on heating oil and food.

And so on.

Even after political change has been won, there is a further problem to be faced: political freedom does not emancipate the poor from poverty. In Egypt now, the decision to end subsidies may triple the cost of staple bread. Subsidies are touted by governments as a way to redistribute the wealth and give the poor more buying power when it comes to the daily necessities. I can understand. I have said it before, the basis of any decision to work for a low wage is predicated on whether I can feed my babies or not. The inability to do so would instil me with vitriolic rage or abject hopelessness. The haunt of hunger is the home of hyperbole. Given the opportunity to live on a meagre wage, so long as my kids were fed, I might choose to eat bitterness and shovel my 16 tons. Subsidies might keep the peace, and ensure adequate food gets distributed to the poor. Still, something is missing from this picture.

Subsidies are funny creatures. We think that they are geared at helping people live from day to day, helping people feed their families. But who actually benefits from them? Now that we've seen the natural progression of thinking for a regular ordinary bloke trying to feed his kids - from despondency to the capacity to bear poverty - what can we truly say subsidies have done? They've driven down the cost of labour, that's what. Subsidies are passed directly to corporations by increasing the public's capacity to bear poverty. The alternative, as we've seen, is rioting. But is it the fault of the government for being unable to provide adequate subsidies, or is it a problem of labour being underpriced?

Subsidies may be defined as helping the poor buy food, but let's call them what they really are: a stopgap measure to address the structural failure of an economy to distribute wealth fairly. Price controls on foodstuffs (and other consumables) are the same thing. Why should the nation tread the razor's edge between deficit spending and riots? In a constant balancing act between two extremes, the key is not to play one side off against the other, but to move the razor. I would much rather balance between a wall-mounted LCD display and not having a wall-mounted LCD display rather than balance poverty against hunger.

And yet, here we are. Subsidies were necessitated by wages that never increased while the price of everything else did. Therein lies the secret to the source of a great deal of hyper-wealth: the disparity between growth in wages and growth in prices. If wages had increased with the price of food - an essential input to labour - then I wit there would be far fewer hyper-wealthy individuals out there, and governments would have less of a deficit. As it stands, we've eaten ourselves into a hole... and done so by spening the money we should have had lying around to dig ourselves out.

So, food fuels labour, labour fuels industry, industry fuels growth, and growth fuels the economy, right? Well, except that growth of the economy will equal greater consumption of those basic consumables, which makes them more scarce, which should make them higher-priced. But if the join between food and labour is based on a subsidised price, then that price signal will not be correctly interpreted by the market. The cost of food stays low, labour stays low, industry stays low, but growth continues (and makes the wealthy extra wealthy!). Which means the price of stuff should be higher... but there's this fantastical wall of subsidy that makes the price of food imaginary. So consumption increases because of growth, and growth doesn't cause a price increase in food, so production of food has to be artificially stimulated to keep up with growth. If price increase doesn't happen, production increase isn't naturally incentivised! The government has to do it itself. Enter agricultural subsidies.

What's already a drain on the treasury has become an even greater drain, precisely because the treasury was being drained to begin with. In this way, an ongoing cost begets and ongoing cost. The government gets trapped propping up its labour and agricultural sector, and where does the money go? Industrial profits. Agricultural subsidies increase supply of food, food subsidies maintain the low price of food, which maintains the low price of labour, which allows for a bigger profit margin for industry because while the cost of goods is going up, the cost of labour stays the same. Subsidies are a band-aid solution to a structural problem. If you leave a bandage on for too long, your wound can fester, but ripping it off is a temporary pain. Sadly, there isn't a single government in the world that wants to be the one that stops subsidies. In an autocratic system, you've already seen what happens... and when the proverbial faeces hit the proverbial impeller, the leaders there reverted to doing what's always worked before when there were problems with the plebians: they gave them bread. This last time, it didn't work (except in Kuwait). In a democracy, the government that removes subsidies doesn't get re-elected. There we are, stuck in a pickle where food prices can't increase to temper demand, where the government can't pull out of the incessant need to subsidise food, and can't stop artificially stimulating the supply of food. Until now.

Now, we hit a wall. Now we tap out our aquifers. The Middle East is the natural place to begin the adjustment to the reality of market forces because the aquifers won't replenish themselves. With subsidies reaching the extent of their ability to keep up with actual food prices, food production is getting to the point where artificial stimulation (including the massive irrigation projects of the gulf and Maghreb) by money can't push yields any higher, and growth runs into the wall of economic reality: eventually, the market undergoes a correction.

The Arab Spring is a great and noble thing, but we need to learn our lessons from it as well. This is certainly more than a market correction - it was a humanitarian correction - and it continues as I write. But Egypt and Tunisia are the first to emerge free of political oppression only to find economic repression there waiting for them. The first to find out that all those subsidies and economic smoke and mirrors cost ungodly amounts of money. The correction happens now, and higher wages are going to be the order of the day, or history will repeat itself. The wall that economic growth is hitting is not imaginary; it is quite real. Only when the real cost of food is known will it become a matter of importance. As the Middle East has shown, food is a strategic resource. We can't afford not to pay for it.

Sunday, 8 May 2011

Hippies Want Me to Build a Geodesic Dome

I found this link on building a geodesic dome greenhouse for over-winter planting in the mountains of Colorado. The dryness and cold (and the altitude, to a degree) are reminiscent of my beloved Alberta, so I had to take a look (even though I find geodesic domes kinda hokey). My dad likes geodesic domes so I felt I owed it to him to at least give the thing a look-see.

What I found was a pretty cool integrated design. Given the water tanks for thermal mass, the design lends itself to aquaponics, so my mind started chugging. There is a video of the greenhouses on youtube, and the pair who make them look like some good old-fashioned hippies. A longer video showcases another Colorado site high in the mountains employing a gigantic 51' geodesic greenhouse. I may have been converted, then again, maybe not.

Saturday, 7 May 2011

So... How to Go about It, Then?

First of all, while colloquial, the capitalisation in the title of this post is perfectly correct. Screwed up, eh?

Yet another thing I have been thinking about for a while: what's the food production plan at this imaginary organic farm of mine? Well, so far all I've done with my life is play video games and learn how to use spreadsheets middling well, so my ideas in this regard are pretty much about as sensible as a flying tank.

But as I started saying in the last post, it doesn't seem to make sense to raise vegetables for sale. A great deal of time and effort goes into preparing a market garden stand, and even the grocery baskets offered by Growing Power don't seem to be terribly earning propositions. The amount of time and effort spent making a surplus of all variety of vegetables doesn't appeal to me as a way to make money. It certainly appeals to me as a way of making food, but in this case, it is to replace the expenditure one would ordinarily make on buying groceries - not to sell at a profit. The point was really hammered home when I saw all the different phases of preparation and cleaning and binding and packing that was happening in the video.

In olden times, you may be surprised to note, Japanese farmers didn't eat rice. Rice was too valuable to eat. It was the staple of the upper class, and the basis of Japanese taxation and currency in general was the "koku" - an arbitrary measure of the amount of rice one person would hypothetically eat in one year. Farmers are millet and vegetable pickles. It's that kind of separation of home use and cash crop that I think might be useful in a modern farm. Pick your cash products for profit margin, and use the garden to offset costs (and generate occasional income when you have surpluses).

Part of this realisation was driven home again when the girl on the video mentioned how many people want to raise all kinds of vegetables as well as pursuing "value added" products. Save all those person-hours washing and packing and preparing vegetables for market. Concentrate human effort in a smaller garden area. In theory, it sounds sensible to do the minimum necessary effort supporting the vegetable and grain operation, keep it in the tightest area around the house to minimise travel time, and make it easy to fence off areas if there is livestock around. The 100 acres isn't all to be completely exploited; I'd prefer to have five acres under active cultivation for the purposes of stocking the larder. Large swathes of land can be seeded to clover for biomass and forage. The additional clear land is for expansion of successful initiatives, not to put under production in the first (or even the fifth) year.

With the forest, several value-added activities are possible. One is sustainable forestry. Every year the farm could sell a certain amount of raw logs. The forest also could provide deadfall for a shiitake operation. The forest would also be a retirement plan, as I have mentioned before: plant ginseng in the first year, after seven years, you can start pulling it out of the ground for income in the lean times, but the idea would be to leave it in the ground as long as possible. Wild-stimulated ginseng sells for a ridiculous amount of money, more when it's older.

Anyhoo, those are the brain farts for the time being. This has been rattling around for so long in my head that I guess I take it for granted that everyone else knows the whole plan.

A Good Reality Check

These guys are a successful organic farm... making $20k a year income for two people.

This makes me think more and more that the food raising operation should focus on feeding the people on the farm, and producing value-added beside that. It would mean the farm isn't a big market garden, it's enough to feed the people on the plot plus whatever product you choose to sell at the market. From looking at other organic operations... it appears vegetables are the worst thing to try to sell! While I admit I'm uninitiated, could it possibly be that raising only the food you need and then focusing on a few value-added crops would be the better way to make an income?

I guess there is only one real way to find out.

How Much Food per Year?

To make calculations of how much cultivation needs to take place on a plot of land, I was looking for a quick and easy way to survey the amount of food a family needs in one year. There are a few resources.

The Family Bulk Food Calculator is one, and comes up with a bunch of food that doesn't really fit my diet, but that's ok. There's this AAOOB place that seems to sell food in "FEMA" units. Knowing how well FEMA has done for itself in recent years, I might take these stats with a grain of salt (or 10 lbs of salt for one male over the course of one year). Each of these places seems to want to sell me stored food. Even is in on the action with the 1 Year Bulk Family Food Supply! Crazy stuff.

As a matter of fact, food storage can apparently be made easy, and very very pink. But I didn't want a year of food storage, I wanted a year of raw food to put in my belly.

I started wondering about how to convert from harvest volume to dry weight in order to figure out how much space would have to be cultivated to provide the food for one family for one year. First step is to find out how bushels convert to dry weight.

So I made a calculator based on the amount of average (mid to low) yield per product on the xls sheet on the pink page. I even included calculations I found for converting acres to gallons of canola oil:

Farmers traditionally set aside 10% of their land to feed the horses. Now days, if a farmer would set aside 10% of their land for an oil crop, they would produce enough oil and protein to supply most livestock operations. For example, an acre of canola yields 40 bushels. From 40 bushels you will make 2000 pounds of meal and 90 gallons of oil, not to mention 3 large round bales of straw and the ability to double crop, even in Wisconsin. The net gain is $560.00 per acre, which would equal corn at $4.00 a bushel without the ability to double crop.
From: HERE. That's some killer biomass left over. It's almost worth it just to grow canola for that!

A lot of my bushels per acre calculations came from here, and they are middling to low estimates. As for rice, where do we get it? Hmm apparently it will grow in Ontario. Sweet.

So far, grain intake is covered by about 0.64 acres of land. We'll see how far my math holds up later, but for now, the calculator is pretty fun.

Wednesday, 4 May 2011

An Idea for an Organic Farm

So I made an open call to a group of my friends to see who would be interested in buying in to a sustainable farm. This is something of a dream of mine, and one I’ve talked often about, but not been able to be totally serious about until now. If the housing market holds up, I will hopefully be able to put together a grubstake to build a rather good house in the country. The catch is that I think it would be better if other families (specifically those with some young kids like mine) came along too. Quite selfishly, I want the clean living lifestyle with food security for my family without giving up the close socialisation my kids get in a city environment. While it’s still my own dream, the family is what’s important.

It struck me, after talking to one of my friends, that people just saw an idea and a price tag and didn’t really picture what I had in mind when I made my offer. Well, here it is in black and white: a concept for a self-sustaining organic farm… with high-speed internet (that’s important). I’ve been researching the technology and everything that I am going to talk about here is mature tech – not pie in the sky tech that might come out in a few years. This is stuff on the ground, now. As many of you know, a lot of our great energy-saving concepts came out of the gas crunch of the 70’s, so these things – while not going mainstream – have nonetheless seen improvement since then. Such things as methane digesters and composting toilets have come a long way. Frankly, a lot of this tech could be implemented in a low-tech low-cost way, but I rather wanted to use stuff that kept the comfort of modern living with the added bonus of being sustainable. Cost reductions are therefore possible with simplification, but only if necessary.

Also, I have been attempting to build a realistic plan by putting together possible alternative income streams other than crops. Growing Power is an inspiration in this regard, as they conceive of the working urban farm in terms of dollars per square foot and attempt to extend profit-making activities beyond simple food production. The modern organic farm concept is something of a highly diverse business venture, with chances to tap income streams all over the map. Additionally, organic farms have the odd habit of attracting cheap labour (WWOOFers et. al.) because they are a shared passion amongst we greeners. Spinoff enterprises include everything from cob and cordwood building courses (which serve to populate the property with guesthouses and outbuildings) as well as aquaponics and organic farming courses that would be a source of income outside the traditional farming model. With a good sized stand of sugarbush, spring tourism would be a possible revenue stream during the sap run. With existing contacts, a yearly Japanese maple syrup tour would be more than possible, and would represent a source of labour that incurs a negative cost: a revenue stream that creates another revenue stream.

So, I am not too concerned about the opportunities to derive profit from an organic farming operation. The issue then is to talk about what exactly the operation would work. My core theory is that of Jacobsian extension: the longer you keep stuff in your system, the more opportunities you have of making profit from it over and over again. The basis is then an attempt to create an almost closed loop system. A closed loop system is functionally impossible – sunlight is an external input that simply keeps on giving, therefore with that external energy source, there is no such thing as a closed-loop system. The key, then, is to make that sunlight input last as long as possible in your system and be a gift that keeps on giving.

LAND: Optimally, I see 100 acres of land with 30-40 acres clear and 60-70 acres in mainly maple. The clear would hopefully have only a small gradient, but the treed area could have a diverse landscape with bogs and hillocks. That’s my preference, but my ideas can be scaled to reality if need be. I would prefer it in a good growing region (6 or 7) but a high 5 will do fine. Access to local water sources preferred but not totally necessary.

HOUSE: The main expense of the operation, the house would be designed to qualify for a Passivhaus certification, meaning it would effectively pay for itself over the long run. Passivhaus design started decades ago (the inspiration came from a hyper-insulated house in Saskatchewan) and is the most strict energy-saving certification in existence. Most Passivhaus designs do not require central heating, even in the depths of a Canadian winter. They are heated primarily with human body heat and lightbulbs in the house. For additional warmth, there is radiant floor heating produced by a solar-powered geothermal heat pump. Since HVAC is almost totally eliminated, as are gas services and heaters, you actually save enough money to pay for the hyperinsulation. Passivhaus designs are being built for about $150 per square foot. Heating costs are near nil. The house would require hyperefficient appliances and solar panels, but again, these pay for themselves over the long run.


This is where things get fun. The core of the farm is the people. The farm must supply food and utilities for the families, and take care of their waste products. Let’s start from the showers, shall we? Showers, sinks, and washing machines produce greywater. Greywater is dirty water that you can’t drink, but if you use the right soaps and detergents, plants can drink it. As a matter of fact, greywater treatment is a main feature of Earthships. It even occurs right inside the house, providing plants that clean the water as well as the air. The water is then used to flush toilets (because using drinking water for that is simply stupid). The treated greywater then gets flushed and becomes blackwater… that’s water, only with poo in it. The poo water goes to a methane digester, which produces both methane (natural gas) and natural fertiliser. Part of the input to the digester must be carbon-rich, and therefore sawdust and other biomass would occasionally be put in from foresting and farming activities. In order to back up the solar power units, the methane could be used to run not only the stove (with three families, there’s enough poo for a lot of methane for cooking), but a natural-gas powered fuel cell. One of these can make sure there is always enough current in the lines. Eventually the poo water becomes spent, and ends up as natural fertiliser on the Fukuoka-style grain fields. Eventually that grain becomes bread and beer, which continues the poo and pee cycle. Pee, by the way, should be separated from the poo by diverting toilets, because it is the perfect nutrient for an algaculture bioreactor – and also can be used directly on fields if diluted. Pee is really useful.

With people eating, there comes food scraps and other organic garbage. That stuff is great, and needs to be kept in the system as long as possible. Its first stop is to the black soldier fly buckets, where oodles of little creepy-crawlies reduce everything except cellulose. They can even eat meat and cheese and other milk products, stuff worms can’t eat. This system produces several products: heat, compost tea, compost, and black soldier fly larvae. There is a use for every one of those things. Heat is useful most of the time in Canada, so we’ll leave that be. Compost tea can be diluted and applied to the land as a very potent source of soil microbes to improve soil health. The compost is moved over to the next processing stage: vermiculture. Worms actually seem to prefer black soldier fly castings to raw foods, and they can process the cellulose that black soldier flies can’t. This process has been tested and it has been proven that not only are the two processes complimentary, the vermicomposting goes faster when the compost has been preprocessed by black soldier fly. This process produces vermicompost for the fields (a compost so rich that it should be mixed with other soil before applying to the ground), and compost tea. The black soldier fly and vermiculture units leave us with a surplus of creepy-crawlies with which to feed our tilapia in the aquaponics unit.

Aquaponics has been talked about before, but for the uninitiated, it’s a system that takes the best of aquaculture and hydroponics and puts them together. There is no cycling of water out of the system: fish poo fertilises planting trays, the nitrates are transformed into nitrites by the resident bacteria, the nitrites fertilise the plants, the plants thereby purify the water. The water can be cycled indefinitely as opposed to flowing through wastefully. The only input required is food, and worms and black soldier flies provide part of that. With an algae bioreactor, tilapia can also eat algae (for which they are adapted because of filters in their gills). Tilapia are omnivores that can truly eat anything. After all, they naturally occur with hippos because they can eat hippo poo. With constantly cycling and recycling nutrients, the only thing a person has to do for an aquaponics system is plant, maintain, and harvest. The amount of food produced by a small system is staggering… and it is tried and tested tech. The aquaponics system would require a greenhouse to be able to produce all year round. Yes, even in Canada, in minus 20 degree weather. How, you ask? Well, I have a mind to incorporate rocket stoves with thermal mass as well as a potential solaroof design. All possible, all tried and tested. With the aquaponics unit would come a flock of Muscovy ducks for pest control, meat, and eggs. Duck poo is perfectly welcome in an aquaponics system, and ‘scovies are at home on the range, capable of foraging and generally taking care of themselves. If necessary, chickens could be added to the system to add heat and carbon dioxide. An odd thing, you may think, to add to a greenhouse… but if it’s near airtight and plants consume CO2 to make sugars, you need a source of CO2 in the greenhouse. The added heat of the coop (as well as the eggs and pest control services) wouldn’t hurt.

A key to the functioning of the farm, then, would be water storage. A pond would be highly useful for not only water storage but production of biomass. Duckweed, a nigh indestructible water weed, is an exceptional converter of sunlight to protein, and can multiply on still water faster than you can say photosynthesis. Opening up a nice pond with duckweed on top would allow for green forage for the tilapia that can be frozen for storage over the winter. Another aquaponics enthusiast does this for his fish, and the nutrient composition of duckweed is superb for fish feed when supplemented with other stuff like black soldier fly (which, itself, is actually superior to most commercial fish feed). Additional water tanks for runoff collection would also be useful for dry periods.

What you see above is a reasonably brief discussion of some pretty nifty thoughts for just the central systems of the organic farm. A woodlot makes a great deal more activities possible, especially if it is maple. With a big enough woodlot, the income from sustainable forestry would also supplement the bottom line, and the use of a pyrolizer for heating in the greenhouse would produce not only heat but biochar – useful in making terra preta. On top of those things, an open expanse of clover would allow for beekeeping, a couple possible dairy cows, goats, you name it. That’s just gravy, as all the necessary calories are already being produced in the systems I’ve just talked about. Excess produce can be sold through the middle of winter. A little bit of cottage industry, and secondary products are also possible. Add in WWOOFers and farm vacationers, as well as weekend courses, the place can become quite an earning proposition.

So, that’s the basic idea. Any questions?

Monday, 2 May 2011

Dao De Jing, verse 31.


And that's about all there is to say about that.

Elizabeth May on Food Security

Sunday, 1 May 2011

The Problem Is the Incentive Structure

As you probably know from reading this blog, I like to think about all kinds of stuff most other people find interminably boring. After writing a couple rants about the stupid incentive structures in most corporations, I found myself pondering incentive structures in general over my morning coffee. It started by me asking myself:

Why aren't corporations aren't targeting the "Base of the Pyramid" (BoP), that 4-billion-strong cadre of low-income consumers?

I reckoned it could have been any number of things, but let me walk you though my first ideas.

1) Perhaps they just had an information gap. It's possible that with over 60,000 multinational corporations (MNCs) in the world, every single one of them has been utterly and completely kept in the dark regarding four of the six billion people on the planet. OK, maybe that's not very possible. Next idea.

2) Perhaps they had information about the BoP, but were subject to prejudice regarding their ability to be a market. I'm certain that a lot of this exists. People in business who think you can't sell something to someone who works for a dollar a day are more than likely the majority. Still, for there to be virtually zero interest in business to serve 4 billion willing customers, that prejudice had to be not only deep-rooted and persistent but pervasive. It means that even when a visionary leader has come along who thinks that serving the BoP could be good business, that prejudice has, until very recently, always won out in the end. I have a hard time believing that this is the case, not only because it requires "perfect prejudice" (and not everyone over the past 60 years has been thus) but also because that prejudice has been overcome by a select few companies. It's clear that there are people who want to sell to the BoP, it's just corporations don't allow them to do it. Next!

3) Perhaps they tried and failed to tap the market. Possible. Hart routinely stated in Capitalism at the Crossroads that companies that try to transport their business models for the 1st world to the 3rd world often find the models have no traction. Why would they try to transport extant business models to new markets? You know, like trying to sell a McDonald's hamburger in New Delhi? McDonald's had to transition to non-beef and even non-pork products and add vegetarian dishes to its menu to serve the bustling metropolis. Perhaps other companies have failed for their inability to be flexible? This is another possibility, but large companies have shown that they can adapt their services and products to local clientèle. Hart argues that the BoP are not just different by local custom and preference, but they operate on a completely different model than the one billion satisfied customers of the first world. While companies can adapt to sell to people who have money in other countries, they can't necessarily adapt to sell to people who don't have much money - especially in other countries.

4) Perhaps the corporate culture played a role. I'm going to be an armchair anthropologist and theorise that there are three things cultures do: stuff that they know is pragmatic and useful in their day-to-day lives, stuff that they know is sacred and useful to their spiritual lives, and stuff they know is taboo. Corporations are no different. Some examples: sales incentives are pragmatic (because they encourage a beneficial activity); staff retreats are spiritual (because nobody can prove they do anything useful, but people still believe in them); and presenting market data about the company in anything but the most glowingly positive terms in the quarterly report is simply taboo. Corporations try to minimise risk and maximise gain. It makes sense that the activities a company considers pragmatic, those activities that make up its culture, are things they've tried before that worked. Humans are innately conservative in this way, we tend not to like to step outside the bounds of stuff we've done before. It makes us uncomfortable. While there are people who really enjoy that kind of discomfort (me, for example), in a working environment where the culture is propagated by all your coworkers, it is hard to be innovative or step outside of your corporation's comfort zone. So far as I can determine, anything not pragmatic or spiritual is taboo when it comes to corporations. I'd go so far as to say that if the idea of serving the BoP somehow got past the first three ideas above, it would be stopped dead in its tracks at this one. Hart called this the corporate immune system, and it's a great analogy. Except in this case, the immune system is malfunctioning, like in Hashimoto's Thyroiditis or Crohn's Disease. The immune system attacks the good parts of you as opposed to keeping the baddies out.

All of these ideas get back to a central point: the incentive structure. Why? Well, perhaps there was an information gap, but why would such a thing happen? Business planning models rely to a degree on demography to pinpoint potential customers. Lamborghini doesn't think about me, because I will never have enough cash to purchase a Lamborghini. Equally so, most companies in the developed world have products that simply aren't a demographic fit for the BoP, more or less by design. This is because corporations attempt to create as big a market as possible with the highest margin possible by measuring potential demand versus total production (supply). Any and all traditional models that serve the BoP are likely considered high-volume low-cost because culturally we are accustomed to modelling the consumer as an individual rational actor who attempts to maximise value. We don't model individual phone service providers with access to microcredit, such as Grameenphone did. This cultural prejudice biases us against low-income purchasers because we misconstrue their actual purchasing power. If we modelled them any differently, we would run up against a corporate taboo: we would step outside the bounds of that which is corporately pragmatic or spiritual. There are always going to be actors in a corporation whose interests coincide with stamping out that which is neither corporately pragmatic or corporately spiritual, because the corporate system privileges the minimization of risk. The unknown is a risk. When you associate a risk with an ongoing expenditure, you will have executives - stumbling over themselves to look good to their shareholding puppeteers - to cut it.

So, all this to say that corporate culture incentivises the information gap because to use untested and unknown models to gauge projected profit margins is risky. Why gather information about a demographic it isn't profitable to sell to? Corporate culture incentivises prejudice because of this same reason - but it could equally be that a corporation has tried and failed to sell to the BoP and this engenders further prejudice. Corporations will try and fail to serve new demographics because of their inability to approach the demographic in a culturally sensitive way, instead considering the extant first world model to be sufficient, then wondering why it doesn't work. This is because, again, stepping outside standard operating procedure is considered an unnecessary risk even if it shoots the venture in the foot from the beginning. Finally, in corporate culture, the incentive is to minimise risk and maximise gain, and executives will a) always be coming in and out of the organisation, and b) always be on the lookout for ways to make their mark. One of the main ways to do so is to "trim the fat" and one day, eventually, your beloved BoP project is going to be that "fat". Your growth horizon is farther away than that executive's likely date of leaving the company. If you don't show spectacular growth in under 6 years (3 preferably), be very afraid.

If something doesn't work, and it doesn't work repeatedly, and it fails in the same way each time, there is a really good chance that the problem is systemic, and not just the victim of the whims of fate. Successes in reaching the BoP are certainly successes against the odds. As I mentioned in my previous blog post, a startup is more capable of navigating the rough waters of a BoP strategy because it comes without as much baggage.

The solution here is not to plead with corporations to do the right thing. The solution is to build a smarter corporate model from the ground up.

More on Capitalism and Profit

I've just gotten to the end of Capitalism at the Crossroads and I wanted to share a couple quotes:

" is precisely the incumbents that most often stand in the way of fundamental change."
(paraphrased from Saving Capitalism from the Capitalists) I've heard this somewhere before.

"It's been said that capitalism is like a knife: It [sic] can be used to cut off your brother's arm, or it can be used to butter bread and feed the hungry - the same knife."
While I think that the simple line "capitalism is a double-edged sword" would have been fine here... we get the idea anyhow. We're back to my contention that capitalism is a force, not an idea or a method or a practice... it's just a fact. Funny how people just don't come out and say that. Capitalism just is. Any business practice that does not incorporate capitalism in its raw form is just an incorrect assumption regarding a potent force of nature, and is therefore dangerous. You should not look at a tornado and call it cupcakes. That's both wrong and potentially harmful to you and any easily manipulated cupcake lovers nearby.

Hart continues: "The problem with capitalism is thus not the profit motive; the problem is how the profit motive is conceptualized. ...there is a persistent myth that the ultimate purpose of business is to maximise profit for the investors. However, the maximization of profit is not a purpose; instead, it is an outcome. The best way to maximize profits over the long term is not to make them the primary goal."
In this statement it is like he is tantalisingly close to a breakthrough in understanding that profit and share value are two separate and distinct animals that don't often have much to do with one another. If Hart could see that the system has incorrect feedbacks at the level of the organisation of the corporation, he might be closer to understanding why certain BoP pilots he used to formulate his BoP Protocol failed. Briefly, the reason why they failed is simple: the quarterly report.

Why? From a systems standpoint consider the following:

1) Sustainability requires the ability to see long-term advantages.
2) The quarterly report comes out every three months.
3) A day trader clears his portfolio every night. How many investors buy big in one company and go long?

Stock price movement and the long-term success of a BoP approach are, simply through their incongruous rhythm, thoroughly disconnected. Every quarter for a long period, the only thing an investor is going to see of the BoP initiative is an unnecessary expenditure. Certainly, there are astute investors who think five years into the future, but they aren't thinking about your company five years into the future - they are thinking of their own future. They may not even hold stock in your company by then. They are thinking about the trades they are going to make in order to put an addition on their house. Your company's long-term viability does not matter to an investor unless it's somehow personal. Individuals will have traded in and out of your company twenty times before a sustainable initiative makes real money. Mutual funds hold huge baskets of shares - they don't care about your company's long-term viability, they care that you outperform S&P for a few years before they shift to a different company. Share price is not profit, and the CEO is beholden to shareholders, not to their company's profit motive. As I have and will keep on saying - profit motive is capitalism; share price is a bastardization of capitalism.

So, why did the initiatives fail? Because the minimum number of times a CEO will have to go to bat to defend that expenditure for a five-year project is twenty: the number of quarterly reports. The average lifecycle of CEOs is about 6-7 years. Chances are high that in the middle of a BoP project, your champion moves to another job. The kind of short-term thinking that ruins companies also makes BoP initiatives hard to protect.

How to solve this? Finance it differently! Shares are stupid for this purpose, and Hart contends that the corporate arms that do BoP work must not, on any account, be spun off from the company. I contend he may be wrong. His worry is that the initiative will be consigned to the charitable arm of the company when it doesn't perform fast enough. My worry is that share price motive will invariably sewer distant time-horizon initiatives anyway. The way to deal with this is to make a wholly independent startup with seed capital from the mother corporation. The seed capital can be in the form of a loan instead of shares. That way, the subsidiary has to make a profit to cover costs and repay the loan, but isn't saddled with constant interference from meddling board-members. It has the latitude it needs and the mobility it craves to do things right. That is perhaps why the example of TWI (a startup) did far better than the other corporate case studies. They were on their own from the start - so when an established corporation wants to do the same, they need a way to be like Cortez and burn their ships.

Just a few thoughts.