I’ve posted a link to a recent review and comparison of alternative energy sources that seeks to rank the various options, including allied choices we can make about transportation.  The study includes many factors for each energy source, including energy security and mortality risks, attempting a cradle-to-grave analysis for each.  This kind of study is required to really understand the implications of choosing a particular energy source.  For example, while Nuclear is “non-emitting” at the stage of power generation, the study analyzes the impacts of emmissions throughout the process from mining to waste disposal.  The study also includes the resource and terrorism risk associated with each competing technology, and nuclear scores near the bottom when all of these factors are tallied.

Like every study, there is much to debate (a nicer word than argue), but the study is well done, well referenced (so you know where the conclusions are coming from), and well worth referencing in any business plan that seeks to discuss the strategic merit of particular renewable energy technologies.

The bottom line: Wind and solar thermal, in combination with battery-electric vehicles are at the top of the list from a technical, environmental, and energy security standpoint.  At the bottom?  Clean Coal, Nuclear and photovoltaics (the current generation anyway).

The review can be found at the Journal of Energy and Environmental Science:  Review of solutions to global warming, air pollution, and energy security.

I am just coming back from a meeting of the MIT Enterrprie Forum SIG on digital media.  The session was on consumers social network, and an interesting discussion took place concerning ad-based revenue models in this space. The question was asked: “If your companies are so successful then why is an ad-based revenue model the kiss of death for investors?”

1) Mass-Marketing is Dead (and the internet killed it).

Part of the answer is that ad-based revenue models have been given a black eye by general audience sites that do not form a focussed user community.  In other words “mass marketing is dead.”  If you are serving banner ads to a mass consumption site then you have a very low likelihood of serving anything useful to any particular user.  Combine that with the fact that people will “turn-off” your ads by simply ignoring them and your actual conversion rate will be very low.  That’s why $/impression is usually so low for these sites.

Google gets around this problem (and achieves relatively high ad-rates, by focussing the ads based on the search terms.  Social sites provide an answer to this problem by creating a focussed audience.  If the ads can be tailored to that audience then ad-rates can be 10 times higher (according to the panel).

2) Facebook (yes, facebook).

The facebook problem is a question of what Hangout.com’s President and CEO Pano Anthos calls the “modality” of the site.  Why are people there? For facebook people are there to catch up with freinds not to buy things. Because of this re banner ads on facebook have a notoriously low CPM. Pano’s gave a hilarious analogy to men’s room advertising.  ”I’m just not there to buy things at that moment.”  So the modality of your site is important as it relates to what kinds of ads will work.  An example was given from the mobile platform mocospace.  People are on the site to interact with their friends much like facebook in the mobile setting.  In this context the best form of advertising is not to advertise products, but rather to inform users about brands.  Forget click-through, you just want to inform, and support the site and the environment where the users are spending their time.  So their most effective ads are album releases, movies etc, where they’re not expecting people to actually make a purchase, but just to become aware of the brand.

3) What kind of ads are they anyway?

Finally, there was the great point raised about click-through and click-to-purchase advertising on the web.  The largest and most well understood form of brand advertising occurs on television.  This is not a click-through or click-to-purchase medium and it has done quite well with advertising and vice-versa.  The same is true of print media.  The ads inform you of something, and that is their purpose, not to get you to make a purchase while you’re watching or reading.  The web need be no different.  In other words, everything old is new again.

The name of the game is creating an audience that will be receptive to the information in the ad, presenting information that the audience won’t immediately ignore.  The rest is old-school.  Everything old is new again.

We started writing “Friends” updates, and decided that blogging the progress of the project might be a good form of PathMaking in its own right (that is, until we change the world).

Dear Friends of MakeThePath (FoMTP):

I’m sending this update to keep you in the loop on the progress of the MakeThePath project. In spite of the economy (or perhaps because of it, see below), cool things are happening, and I see an increased interest in community-building projects like ours. Here’s what’s been up (in mini-blog form)

1) SBIR-grant

Just yesterday we submitted our SBIR (Small Business Innovation Research) grant application to the NSF’s Software Engineering division. If we are successful, the grant will provide funding for the first phase of project development and will get us to an alpha-testing stage (which I hope some of you will want to try). Grant writing is always a bit of a chore, but it turned out to be a useful exercise in refining the technical details for how the algorithms will actually work (the precise details didn’t exactly make their way into the proposal, of course). Naturally, we are working on the alpha-version while the NSF deliberates,

2) Investors’ Circle Conference

I attended the Fall conference of Investors’ Circle, a group of investors (including angels) in the socially responsible investing space and made some contacts that should prove useful for the project going forward. These investors face an interesting problem that was the topic of much discussion at the conference. The idea behind socially responsible investing is to maximize social returns as well as monetary returns. The problem is that monetary returns are simple to measure and compare between investments, whereas no standard exists for measuring social return. In the past, socially responsible funds have employed so-called “negative screens” to screen out businesses that were involved in gambling, producing weapons, cigarettes, alcohol, etc. However, the current phase of socially responsible investing is directed at funding companies that not only “do no harm,” but actually create social good. The tricky part is defining “social good,” and measuring it in a way that allows different investments to be compared. Several “ratings organizations” were in attendance, and you can already see a battle of social metrics brewing. It’s important, I think, because until investors can compare funds on some reasonable metric, they (we) will simply sort the choices by 5-year or 10-year returns, and choose on that basis.

A second theme that will be of more interest to the legally-minded among the FoMTP was a discussion of how fiduciary duty norms can inhibit directors from considering anything beside financial return in their role as directors. Socially responsible investors are in an interesting position since they may have a seat on the board, and are concerned about their duties under Revlon when it comes time for their exit (e.g. sale of the company). There is a group working on creating what they term the B-Corporation, which would be a legal entity somewhere between the traditional C-corporation and a non-profit. The idea is to structure the company as a C-corp from an ownership and tax standpoint, but allow the company to explicitly include in their charter and bylaws directives to the board and management to consider other forms of shareholder value in addition to economic return. Some states (including Massachusetts) already allow such considerations and the B-Corporation group is working to amend other state corporation laws (Delaware especially) to make such a structure possible. Green-Arrow is proud to be a Massachusetts corporation for just this reason (though we are aware that this will be a “challenge” down the road).

3) Are we out of our minds?

Finally, as the economy continues its slow melt, I have this motivational article from FoMTP Drew Fitzgerald. I may have been out of my mind for leaving my job just as this was all happening, but at least I’m in good company. Thanks Drew.

http://www.wired.com/culture/culturereviews/magazine/16-12/st_essay

Well, back to making the path, as we say around here.

Thanks for your support, and we look forward to getting something fun for your browser soon.

Best,

Scott

People often ask “isn’t oil at $40/barrel (or fill in your favorite number) going to kill all this CleanTech investing?”  The subtext is that we’ve been through all of this before in the 80s, when oil prices came down and consumers went back to purchasing large cars without regard to mileage.  The easy answer would be “yes, the same thing wil happen this time as happened in the 80s.”  In this post I’ve listed some of the major arguments that have been presented for why the current situation is different and why history will not necesarrily repeat itself.

1) Oil prices are currently low because global demand is low, and when the world economy begins to expand again, oil prices are certain to rise as they did during the 2000s. 

This is a simple supply and demand argument, the price has gone down not through an increase in supply, but because of shrinking demand.  This was not the reason for the fall in oil prices in the 1980s.  When demand returns it will press up against supply limitations and the price will likely rise sharply.  

2) There was not a global concern about carbon emissions in the 1980s.

You can believe what you want about the causes of global warming, man-made, sunspots, planetary expansion, martians or any combination.  The fact is that the world has reached a  consensus that human emission of greenhouse gases is a significant cause, and world governments, including the U.S.,  are working on greenhouse gas legislation and treaties that will provide a significant incentive to CleanTech businesses.  Any CleanTech executive who does not accept this proposition is leaving money on the table (a very un-businessman like thing to do).  By the way, if you have a non-man-made theory I’d love to hear it, I’m collecting them as a sort of hobby.  Leave a comment and don’t forget your primary references.

3) Energy Security = Economic Security = National Security.

A country that consumes more energy than it produces becomes reliant on others for a vital component of their economic well-being.  This presents a basic strategic problem and students of history will know well that governments pay mightily to maintain ready access to needed resources.  In an increasingly crowded world, securing resources becomes more expensive thus making domestic production, reduced consumption and increasing GDP per BTU (i.e. efficiency) the obvious strategies in response.  This was not a consideration in the 1980s, in part for the reason listed next.

4) The developing world is developing which means more global competition for energy.

When developing nations begin to create a middle class, energy consumption in these nations increases dramatically.  As the middle class gets a taste for meat and cars and more modern homes and amenities energy consumption per capita rises.  In the case of India and China, the standard of living has a long way to go for a large number of people, and the increased energy demand will be enormous.  These new market actors compete in markets for oil, and form relationships with oil producing governments to supply oil, in some cases removing it from the broader market.  This increased global demand was not in place in the 1980s.

5) Green jobs are the acknowledged future for labor and national competitiveness.

CleanTech companies create more that new gadgets.  They create industrial jobs.  These are the jobs of the future industrial base of the global economy, and the in-coming U.S. administration has pledged $150B over the next ten years to creating companies and thus jobs in this sector.  No such job-creation incentive existed in the 1980s.  P.S. $15B/year, that’s a lot of money.

6) A corollary to #5, economic stimulus = funding green-collar jobs.

The current economic crisis has led to increased unemployment, with the U.S. auto industry and the many skilled jobs it creates teetering on the brink of collapse.  Every economic stimulus package currently being discussed to deal with the crisis contains as a primary goal, the creation of the “green jobs of the future.”  CleanTech companies should position themselves as the engines of worker retraining and redeployment that is necessary for us to emerge from the other side of this crisis.  Again, this was no the situation in the 1980s.

This still begs the question, will the nation ignore all of these strategic and economic reasons for avoiding a repeat of the 1980s response to lower oil prices?  Only time will tell.