Thursday, September 01, 2016

In Defense of John Z. DeLorean

I worked with John Z. I knew John Z. John Z was a friend of mine. *

Even though John Z DeLorean has been part of my business background since I can remember (I used to work at General Motors), lately two books have kindled old memories:

1. The DeLorean Story by Nick Sutton
2. Ego is the Enemy by Ryan Holiday

The first one is an insider account of what went right and wrong at DMC. It is obvious that the author knows what he is talking about.

In contrast with Mr. Sutton, Ryan Holiday has only very superficial knowledge of DMC and just tries to "prove" the central premise of his book by making gross oversimplifications. Since his book is titled "Ego is the Enemy" he just concludes DMC and John Z himself failed because of only one reason: his gigantic ego.

Not so fast.

Yes, John Z had a gigantic ego, however, without it he probably would have stayed at GM all his life and thus would never have started his namesake company.

Real life is complicated and there is not one simple, clear-cut reason DMC failed, however as a long time automotive industry insider I forward the most probable cause: John Z tried to tackle the impossible.

The last successful American automotive company launched was Chrysler in 1925. However, Walter P. Chrysler did not actually start it from scratch (as did John Z). Mr. Chrysler bought Maxwell Motor Company and named it after himself.

The automotive industry is very capital intensive. John Z just didn't have the capital to launch a full blown car company. Thus the car had to be designed by Lotus, it used a Renault engine, and, worst of all, he had to accept building his factory in what was then one of the most dangerous places on Earth: Northern Ireland.

Almost everything was against him, so the fact that DMC was able to produce more than 8,500 cars before going under was a minor major miracle. What is more, 25 years after the company died close to 75% of all DMC-12s were still in existence!

For DMC to have continued as a going concern, a series of consecutive miracles were needed and this was an unreasonable expectation for a mere mortal to pull through and thus DMC went under.

Today, we have Tesla Motors and even though the odds are not as badly piled up against it as DMC had them then, here is our prediction:

Unless it is bought by one of the giant industry players, Tesla will go under. And it will not be due to Musk's gigantic ego. (Although a future edition of Mr. Holiday book might explain it that way). It would be because, again, a man tried to achieve the impossible.

Still, it is probably a good idea to buy a Tesla now as 25 years from now (long after the original batteries are in a landfill) the cars themselves might still be extant and valuable.

* I never actually met John Z. I was just paraphrasing Senator Lloyd Bentsen during his debate with Senator Dan Quayle. 

Feel free to add to the conversation in Twitter.


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Tuesday, December 09, 2014

Technical Feasibility

That something is somehow technically feasible, doesn't mean it makes economic or even environmental sense.

Let's consider the following question:

1. Is it feasible for a country to transition to 100% renewable* electricity? (Assuming there are no financial or material constraints).

The answer is almost certainly yes.**

However, that is not the important question. The important question is:

a. What would be the purpose of generating all the electricity of a country with renewables?

If the answer is: to reduce CO2 emissions, then I think we first need to make our homework.

Off the bat, neither solar PV nor wind are zero carbon emitters (once their lifecycle is considered). Sure, no technology, not even hydro, is zero emissions but according to the IPCC**** utility scale solar PV has a median value of 48 grams of CO2 equivalent per kWh. Low, but not extremely low. Wind clocks in at 11 grams. Much better.

However, the numbers above do not include either the back up plant (usually fossil fuel powered) that is needed most of the time to support the relatively low capacity factors of renewable energy, nor the lifecycle emissions of the massive storage that would be required to somewhat wean renewables from fossil fuel plants.

So say, if on an annual basis wind supplies power 25% of the time and a natural gas power plant the rest of the time, the weighted emissions would be:

          25% x 11 grams/kWh + 75% x 490 grams/kWh = 370 grams/kWh

Yes, it is lower than a natural gas power plant by itself, (reduction of 120 grams/kWh) but are these modest CO2 reductions worth the double investment?

And, more important, is there a better way to invest our limited financial (and material) resources to achieve more bang for the buck?

As an exercise, the replacement of a coal plant with a natural gas plant would result in the following reduction:

          820 grams/kWh (coal) - 490 grams/kWh (natural gas) = 330 grams/kWh

The reduction in emission is almost three times larger and probably with a smaller investment that would last longer. (How long before wind turbines have to be replaced?).

Now, if we replace the coal plant with a nuclear one the numbers look this way:

          820 grams/kWh (coal) - 12 grams/kWh (nuclear) = 808 grams /kWh.

The reduction in emissions is almost seven times larger than with renewables.

Conclusion: technical feasibility by itself does not justify investments in renewable energy. More important is to consider the financial and environmental factors.

Feel free to add to the conversation in Twitter: @luisbaram

* By renewables we mean solar and wind in this article. Hydro is also a renewable but it is in a league by itself and we actually already have countries generating 100% of its electricity with it. Among them we have Paraguay and Albania.

** Sure, the manufacture of the wind turbines and solar panels would require massive inputs of fossil fuels, but for simplification we won't consider them at this moment.


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Wednesday, December 03, 2014


For literally thousands of years, humanity made little technical progress at least as it helped to improve the life of millions upon millions of people and then, suddenly, 200 years ago or so our technological capabilities just exploded.

To what do we owe this?

On a first approximation we could say that fossil fuels were the trigger but on second thought, they had already been known for hundreds of years and little was made of them.

No, more important than the fuels themselves were the engines developed:

1. The steam engine.
2. The internal combustion engine.
3. The gas turbine.

These engines allowed coal, oil and natural gas to be converted into movement, into transportation.

Electricity had also been known for a long time but it was not until the electric generator (powered by one of the engines above) provided abundant energy to illuminate and power the world that electricity became overwhelmingly important.

However, electricity was not only power and light, it was also signals, and here the all important developments before 1950 were:

1. The telegraph
2. The telephone
3. Radio and television

Crude implementations of the first two could exist without electronics proper, but radio and television required an amplifier and thus came into being side by side with them the vacuum tube.

Finally, electricity was one more thing: "intelligence." The first fully electronic general purpose computer, ENIAC, came into being in the late 1940s. It used prodigious amounts of vacuum tubes (more than 18,000).

So, by 1950, we had cars, airplanes, trains, air conditioning, elevators, radio, television, telegraph, telephone and even some computers.

Accelerated progress seemed to lay in the past because the vacuum tube required loads of power and was too big and unreliable to be implemented by the thousands in computers and other devices.

Say, a basic cell phone was completely out of the question, let alone a personal computer, tablet or smart phone.

And then came William Shockley and the transistor.

The first transistors were more often than not just (lower power / smaller) replacements for vacuum tubes, but if we wanted hundreds, thousands, millions, billions of transistors in a single device another breakthrough was needed.

And then came Robert Noyce and the integrated circuit. This allowed complex circuits with many transistors to be built into a single crystal of silicon, but if we wanted a full computer to be swallowed in a single integrated circuit, another breakthrough was needed.

And then came Ted Hoff and the microprocessor.

So arguably, our awe inspiring current civilization critically depends on at least the following foundations:

1. Abundant / relatively cheap energy (mainly fossil fuels).
2. Engines that use those fuels to produce useful work.
3. Electricity that, aside from light and power, means signals and "intelligence."
4. The transistor / integrated circuit / microprocessor

The future challenge for our civilization is probably more than anywhere else in point number 1. If fossil fuels won't continue to be forever cheap and abundant, then we'll need other types of energy to replace fossil fuels.

How much time we have is open to discussion, but almost everybody agrees eventually we'll need to massively replace fossil fuels or enter into the twilight of our civilization as we know it.

Are the current alternatives we have today (nuclear and renewables) good enough to massively replace fossil fuels? Probably not.

In the past, technology has always come to our rescue:

Engine technology.
Electricity generation.

Today, once more we need technological breakthroughs, this time to develop cheap / abundant / low carbon energy.

Let's remember that wide deployment of a technology critically depends on cost. The first transistors Fairchild Semiconductor produced for IBM in the 1950 had a price tag of $150 USD each in bulk amounts (1950's dollars). Today the cost of each transistor in an iPhone is around one millionth of a cent (2014 cents).

Thus, if something is going to replace fossil fuels, the cost of that energy is all important (we have to consider the full system, not only a component).

Will humanity rise to the challenge? Let's stay tuned.

Feel free to add to the conversation in Twitter: @luisbaram

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Thursday, November 20, 2014

Hydrogen Powered Cars

This post is about the Toyota Mirai, a hydrogen powered car that is now entering production.

First, let us state that yes, we should all support technological innovation. And yes, when a new technology is introduced into the market, significant improvements tend to be made in a relatively short time.

However, after saying the above, let us make some pertinent questions.

One important sale point for a hydrogen car is that it produces no emissions (the car itself during operation), but since free hydrogen is not available on Earth, it first has to be produced. Thus, we come to the first question.

1. How is hydrogen currently produced? 
     Currently most hydrogen is produced from natural gas at an efficiency of ~80%*. Off the bat, this
     means two things: a) 20% of natural gas' energy is lost in the conversion and b) significant
     amounts of CO2 are produced during the conversion itself. Thus, these emissions need to be
     considered part of the system emissions of the hydrogen car.

2. What is the efficiency of the fuel cell (the device with which the Mirai converts the hydrogen 
     into useful electricity)?
     Without cogeneration, the efficiency of a fuel cell is in the range of 40 to 60%.**
     As a reference, rechargeable batteries have efficiencies above 90%. Consequently, just combining
     the production of hydrogen with electricity generation in the fuel cell, the combined efficiency
     drops to ~50%.

Thus it could be stated that the Mirai is competing with EVs (electric vehicles) on the one hand and with NGV (natural gas vehicles) on the other.

Today, the EV is clearly more efficient and lower cost than the Mirai. In other words, the EV would produce less emissions in most scenarios.

The NGV is much less expensive (and less efficient) than the Mirai. However, it remains to be seen if the considerably higher cost justifies moving to a Mirai rather than just buying a conventional electric vehicle.

Conclussion: Innovation should be supported but the hard questions need to be made.
Feel free to add to the conversation at Twitter: @luisbaram




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Sunday, November 16, 2014

Confront the Brutal Facts

What world leaders are committing to achieve in the next few years is more fantastic than anything mentioned in Alice in Wonderland.

Take a look, these are a few of the things that are supposed to take place simultaneously:

1. GHG emissions will drop.
2. The global economy will roar ahead with turbo-charged growth (an additional two trillion dollars as of yesterday).
3. Population growth will remain unchecked.
4. Renewable sources (in particular sun and wind) will replace fossil fuels wholesale and this without hardly any help from pesky nuclear.
5. We'll bring billions of people out of poverty.
6. And all of the above will be achieved with no use of GMOs whatsoever.

And we thought Charles Dodgson had a powerful and unique imagination!

Governments and NGOs can plod ahead for years without even acknowledging reality. That is why they continue doing more of the same things that take us even farther away from solutions. If they were businesses, they'll be bankrupt in no time at all.

For example, if renewable energy increases the cost of electricity and increases emissions per kWh then the solution is... to install even more renewable energy.

Business doesn't have the luxury of ignoring reality. Things get very ugly, very fast, if you are not hyper connected with the real world.

As an example, Circuit City was considered one of the few Great companies in Jim Collins legendary book, From Good to Great.

"From 1982 to 1997, Circuit City's stock price had outperformed that of the general stock market by an incredible 18.5 times, far better than any other Fortune 500 company for any fifteen-year period since 1965. Yet just twelve years later, Circuit City was no more."

But then, Circuit City began to live in wonderland and... it was liquidated.

Alan L. Wurtzel, a former Circuit City CEO has the following advice to prevent a company from destroying itself.

Evidence Trumps Ideology: Evidence about the real world trumps ideological assumptions every time.

Confront the Brutal Facts: The worst person you can fool is yourself.

If our civilization goes "bankrupt," much more than the demise of a company will be at stake but it is probably about time we began managing governments and NGOs more like businesses. In other words, fiercely focused on results.

The first thing we probably have to do is revisit our objectives. We cannot simultaneously reduce emissions, maintain economic growth, increase population and ban the use of GMOs. Some of these objectives are mutually exclusive.

In my opinion, in the short / medium term we will sacrifice the two objectives that would cause the least pain: GHG and GMOs. In other words, we will not reduce our GHG and we will increase our GMO use.

Let's stay tuned in Twitter: @luisbaram

Monday, October 20, 2014

Stroll In the Park on a Sunday Afternoon

It seems some people believe that moving to a low carbon economy is something easy that just requires "political will," and that the way forward is to pressure politicians with tumultuous "climate marches."

Well, it is not that easy, not even close.

To get an idea of the barriers to a low carbon economy, let's focus at the personal level. Here are some things an individual can do to drastically reduce her / his carbon emissions. Bear in mind that reducing the carbon emissions of humanity would literally be many orders of magnitude more difficult than this.

1. Eliminate air travel. Period. No looking back. Vacations should be relatively local. If you are used to travelling for business, then use video-conference to be in touch with your customers. Sure, it won't be as effective as face to face interactions, but  it is one of the prices to be paid for a lower carbon footprint.
2. Have less children or none at all. Off the bat, a new person that lives 65 years and produces the current average annual CO2 emissions (4.5 tons) would add almost 300 tons to the atmosphere in her lifetime. One billion persons would add 300 Gigatons, and this is considering the average emissions stay at today's value.
3. Eat less meat.
4. Buy much less stuff.
5. Adjust the thermostat in your A/C: make a point to be colder in winter and warmer in summer (without actually freezing or dehydrating).
6. Use your car less, much less or make without it altogether.
7. Try to enjoy cold showers, or at least cool showers.
8. Turn off every light / device as soon as you are through using it.
9. Assimilate (properly vetted) GMOs. We need to produce more food with less land/energy input.
10. In summary, embrace a lower standard of living for you and your family.

However, when things are distilled at the personal level, many "greens" rebel. They are not willing to participate in the game anymore. They want to just join in two or three "climate marches," pressure their university to "divest" from fossil fuels, glue a bumper sticker in their car with the "#GoSolar" message and re-tweet some Greenpeace thoughts.

Well, that will never work.

In truth, very few people will downgrade the standard of living of themselves and their children to "save" their eventual great-grandchildren. This is just human nature. Thus, bar a black swan (or two), the best way to reduce emissions (in addition to decreasing population) is technology.

Technology can help in two ways:

1. Do more with less (e.g., an LED light bulb produces many more lumens per watt than an equivalent incandescent lamp).
2. New massive amounts of low carbon energy. Current nuclear and renewables are at the most a stopgap. We need much better nuclear (fission and fusion) and other types of energy in the near future.

A happy, high energy future (with much less reliance on fossil fuels) will only materialize via technology.

Feel free to add to the conversation in Twitter: @luisbaram

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Thursday, October 16, 2014

Barking at the Wrong Tree?

Even though the science might (or might not) be settled, the climate discourse is still heated between those that sustain that carbon dioxide emissions are increasing the global temperature of the Earth and those that do not see it as a menace.

However, I believe this discussion is misguided and thus that we are barking at the wrong tree.

If the first camp is correct, then we need to drastically reduce our fossil fuel consumption. To be able to do this without destroying the world's economy (and thus severely curtailing the possibilities of reducing poverty and even shoving many / most of us toward that same poverty) would require a massive substitution of fossil fuels by other, lower carbon energy sources.

If the second camp is correct, the so called "deniers" then we still all probably agree that fossil fuels will not forever be cheap and abundant.

Consequently, it seems to me, both groups should agree that the (eventual) replacement of fossil fuels should be a top priority.

If we look around today, we see lots of PR from the renewable, efficiency and even the nuclear camps, but where the rubber meets the road, (in other words, massive alternative energy production ramp-up) we don't see anything worth noting.

The Energy Information Administration estimates that by the year 2040, close to 80% of our primary energy will still come from fossil fuels, however, since consumption is projected to increase in absolute terms that means more CO2 emissions than today.*

Yes, renewables (solar and wind) will survive and maybe even thrive in the coming decades but there is no way they will dominate the global energy market. Why? Because they are diffuse (in other words, weak), intermittent and unreliable. Renewables are in a sense a road to the past. Centuries ago, practically 100% of our energy was renewable but our civilization moved forward with denser and more reliable energy.

Current nuclear is not that much better. Yes, it is low carbon, yes it is orders of magnitude denser than renewables (and even than fossil fuels) but it is still too expensive and hard to scale up rapidly.

In his book Zero to One, Peter Thiel states that "only when your product is 10X better can you offer the customer transparent superiority." Well, that is certainly not yet the case respecting our current alternatives to fossil fuels.

The solution to our energy quandary has to be technology. We won't advance toward the future by walking backwards.

New nuclear (fission) designs in the drawing board seem great on paper, but to prove their concepts we would need massive implementation in the real world. This is not happening. At least not yet.

Even though it might not feel like it, our civilization has been upgrading its energy sources to better ones:

Coal is better than wood, wind and water.
Oil is better than coal.
Natural gas is better than oil.
Nuclear is better than natural gas.

Sure, the above statements are arguable, but the point is we have been moving to denser more reliable energy that is actually cleaner. (Without coal, we would probably had destroyed all our forests to use them as fuel).

So, bottom line, our civilization has been moving forward and there is no way back (at least not if we plan to support +7 billion persons).

Renewables are in a sense a return to the past. New nuclear (fission and fusion) can be a step forward, maybe even a giant step forward.

How much time do we have to replace, say, 50% of fossil fuels with nuclear? That depends on when fossil fuels will become painfully expensive / scarce.

Try as we might, this transition will probably not be fast. It may take 100, 150 years, or more, but as JFK used to say: let us begin!

Feel free to add to the conversation in Tweeter: @luisbaram


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