Wicked Problems

      I like the term 'wicked problems.' And not just because I am from Boston.
     The term refers to public policy problems with extraordinary amounts of uncertainty--climate change being the quintessential example. Wicked problems are the really hard stuff. Stuff the most reasonable people in the world can disagree about, stuff the most intelligent people in the world can get wrong. 
     Everyone wants to pull a lever and fix the whole problem--and many think they can. But there are thousands of levers, and we do not know where most of them are. And even when we do know where the levers are, pulling them can make things worse!
     Whack-a-mole with higher stakes. 
     It's tempting to take an anecdote to heart. Or to base our decision on a quick tally of how others are responding. 
     However, solving wicked problems requires innovation and experimentation. And most of all, it requires broad networks of stakeholders--people, businesses, and policymakers--effectively learning from each other, sharing best practices, and applying lessons learned. 
     My intention is not to solve these wicked problems--I don't know how to. No one person holds the answer. That's the point.
     Instead, I'm pulling the smallest levers I can find, and helping others to do the same. 
     I think it's the only way to do it. 

Energy Efficiency and Profit Inefficiency

According to the Harvard Business Review, 88% of executives believe corporate performance would rise if they could escape "quarterly capitalism." One consequence of the "tyranny of short-termism" is underinvestment in energy efficiency. In fact, less than 5% of Fortune 500 corporations have energy efficiency targets despite the benefits. 

I see three reasons for this. Per usual, reasons are tentative. As I research more, I will report back. 

Corporate Structure

In many ways, corporate executives' hands are tied. Executives in public corporations owe a duty of loyalty to stockholders. In turn, stockholders often owe their loyalty to quarterly reports. This makes it difficult to spend money in one quarter, even when guaranteed a net benefit down the road. Although I wonder if it's more like "half-dollarly capitalism." I'm thinking of start-ups who go public while warning that they will not be profitable in the short-term. 

Energy Prices 

Relative to Europe and elsewhere, energy prices are cheap. This is likely to continue because of of increased natural gas extraction, and because energy transitions can take a long time. It took about a hundred years for steam-powered coal to become cost-competitive, and another hundred years for our current energy regime of fossil fuels and electricity to takeover. 

Mental Models and Physical Solos

I agree with the GM of Midwest Energy Group who places blame on organizational structures. In many organizations, energy efficiency falls victim to something akin to the tragedy of the commons. No one takes responsibility, and all suffer for it. 

Without lateral-thinking, a broader perspective, and a longer time horizon, profits will remain unrealized, and GHG emissions will needlessly increase.

What was a win-win becomes a lose-lose.  

Filling a Gap

Neither law or policy school does a great job with the business side of things. I've always wanted to know more than just microeconomics and applied statistics, so I was excited about this free Corporate Finance course offered by the Stern School of Business at NYU. It is taught by someone who can really distill complex concepts into an understandable form: Prof. Aswath Damodaran.