Oil dreams

A recent article (1) seems to restate what many people have been talking about for over a century – the world is slowly running out of oil and the prices are slowly approaching infinity, with disastrous consequences on the economy. They cite the continual decrease in production from established fields and the high cost of reaching oil in yet to be discovered areas. They note that shale gas is not a solution as such production techniques deplete the resources faster. Finally they conclude the obvious, “Historically, there has been a tight link between oil production and global economic growth – If oil production can’t grow, the implication is that the economy can’t grow either.”

These observations are fair enough. Since the authors like historical data, they may want to extend the study a little further into the past. They may want to ask how economies grew before black gold was gushing out of the wells, world over. More importantly, history may also tell them that findings similar to theirs have been around for over hundred years. Ever since the “tight link,” between economic growth and oil production was discovered, people have been worried about running out of it.

However, such analysis is not giving due credit to the spirit of innovation and the already fast developing world of alternative energy sources. Oil has always been a transitional energy source – something that gave tactical benefits in production and storage but with long term costs. Increasing cost of oil will act as a significant boost to alternatives already fast approaching parity. The two engineering challenges – production and storage of electricity from renewables – need to be solved and we are well on our way to do that. With little help from increasing oil prices, we will likely reach there faster.

Panicking is never a good answer to solving any problem – especially if you find that such panic has been present for over a century. Most generations were afraid of the “tipping point,” just like ours. Those who need something to panic about, the most obvious choice is a meteor hit that will vaporize the earth – oil and all.

(1) Commentary in Nature: Can economy bear what oil prices have in store?Published: Friday, January 27, 2012 – 14:35 in Mathematics & Economics. Source: University of Washington

Bigger data

The next sustainable fad has arrived – it is called “big data.” Ever since computers and the internet arrived a few decades ago, the collection, analysis and storage of data has been an allure to almost everyone. In the 80s, Artificial Intelligence threatened to solve all problems faced by humans. Two decades long irrational exuberance in Enterprise Resource Planning systems and business analytics continue to burn holes in the budgets of companies who can afford it. Giants of the internet, googled their way to stardom with algorithms that understand who you are and what you are made off. The influx of jobless Physicists into Wall street, where data is cooked and served every microsecond, created yet another class of hedgers who got wedged by  volatility, later.

Now, big data has arrived. This is good news for both hardware vendors and software makers. The former can now focus on making bigger storage bins and faster processors and the later can create code that will create music from randomness. Such sustainable fads are actually good for the economy – they will likely create stimulus faster than just showering money from the clouds. In this case, they are indeed making clouds that can rain data at a moment’s notice to anywhere. Just as in previous sustained fads, “big data,” is also process oriented – in which the first step is to lay out how to collect and grow the data. The focus is on designing processes and constructs that can consume the big beast. How such a process will add value will be dealt with later. For now, consultants and the IT gurus cannot afford to think about that, for lack of time.

Data – the lifeblood of business – will grow again – uncontrollably, migrating into clouds and underground warehouses. One has to brace for the arrival of the next fad, when knowledge may finally migrate to the clouds as well – completing the process of making intelligence, truly artificial.

Ref: Flexibility : Flexible Companies for the Uncertain World

http://www.routledge.com/books/details/9781439816325/

The hangover

The boomers of today lived a significantly different life growing up than what is available in the modern world. Their senses are finely tuned to an era when certain archaic constructs such as the war and drugs, reigned supreme. They had abundant opportunities in a world that was growing. They participated in two fundamental step function changes in the economy – the computer and the internet – that provided them with plenty of opportunity. Their outlook of life is shaped by what they have been endowed and what they know.

In the modern world, however, this is akin to a hangover. This hangover is killing companies and countries led by people who do not have any connection to the present. They look to the X and Y generation and find them lazy and they see the Z generation as utterly dumb. This perception cannot be any further from the truth. The hangover that prevents the next generation from taking control of their lives, companies and countries is the biggest threat to humanity today. To make matters worse, the boomers are in firm control of most of the productive assets of the world and they are getting more powerful.

The boomers are out of touch with the current realities. It is a different world – the next generation do not want segmentation and their faces are in a singular book across the world. They use networks and not bombs to unseat autocrats and they are constantly in touch using always-on technologies. Boomers simply do not have the competence or the knowledge to lead in today’s world. It is time for them to retire and usher in a much more productive world led by innovation and not bureaucratic friction.

Getting closer

Solar – the most elegant method of producing electricity – has not been viable in comparison to other alternatives. Comparing the total cost – considering construction, operation and decommissioning, it has been twice as expensive as the nearest alternative – natural gas and three times as much as hydro and nuclear. However, hydro is location specific and nuclear has significant tail risk in the storage of spent fuel that is not fully considered.

Ref: Comparing Energy Costs of Nuclear, Coal, Gas, Wind and Solar, By Jason Morgan | Published April 2, 2010

Solar, albeit being the cleanest production method, has been priced out of the market, thus far. The only reason, solar plants are seen around the world is subsidy – both for the manufacturing of solar panels in countries such as China and for the construction of solar plants in countries such as Germany and the US. Developing countries have recently initiated subsidy schemes similar to what exist elsewhere.

Subsidies, for the manufacture of solar panels using traditional methods and for the construction of plants that destroy economic value, are not a way to solve this problem. More R&D is needed for process innovation that will reduce the cost of manufacturing and improve efficiency of plants. Recent research (1) has made the prevailing idea of embedding quantum dots into the solar panel more practical, extracting an additional 50% efficiency in production. Another 50% in manufacturing process efficiency, will bring solar to be in direct contention with natural gas. With societal costs fully considered, solar will then become the natural and uncontested option.

Energy policy is complex and it requires the consideration of available resources, portfolio of production assets and consumption patterns and emerging trends in technology. Policies that dole out blind subsidies are never good. Production and manufacturing subsidies are tactical band aids. What is needed are policies that strategically and holistically solve the energy problem by R&D, making solar an economically viable option.

(1) In solar cells, tweaking the tiniest of parts yields big jump in efficiency. Published: Saturday, January 21, 2012 – 00:35 in Physics & Chemistry. Source: University at Buffalo

The beautiful

Turn of last century witnessed a copy of a human, who defied all odds to become the most beautiful. 10,000 years of modern human history eventually produced a mind of significance when perhaps for the only time, the heavens may have smiled, albeit briefly. There may have been leaps of equal importance in the past, but not in the time span modern humans can track. He battled autocracy but he conquered science through imagination when such pursuits were considered inferior. He visualized the meaning of heavens and translated that into comprehension by paper and pencil. He raised the human spirit to levels that meaningless religions of the past could not imagine. He instituted science as the pursuit of happiness and knowledge and he drove generations to be thankful for their minds. They cut and diced his brain, but they found nothing unusual.

He was human, for he showed weakness when a few decades later, humans of similar competence but less passion demonstrably showed he was completely wrong. He has been wrong for over a century and mortal humans of incompetence have been measuring every possible thing they can find to prove him right. They constructed eyes on the hill, arrays in the valley, peep-holes in space and heavy metal in the heart of Europe to prove him right – but he was wrong. Gravity has eluded men of steel and those who measure noise in deep holes under ground. Gravity shall elude men again, in spite of the toys they build for insights do not emanate from experiments. Insights only come from imagination – an ability to visualize God and her tricks and an ability to laugh at the constraints that will prevent humans from finding the truth.

Beauty is fleeting. It is likely that humans will drive themselves to obscurity by experimentation and data. Some yearn for the appearance of beauty, one more time, for without it, life remains to be meaningless.

Improved plumbing

Recent revelation that the side benefits seen in the common Diabetes drug, Metformin (1), to reduce the risk of cancer was due to its ability to affect the mutation rate in somatic cells beneficially by slowing DNA damage, is instructive at many levels. It further reinforces the fact that most modern diseases can be attributed to the wear and tear of the hardware – something that was never designed to hold up for such a long time. Although medicine’s battles have largely been against external attacks on the human body with unanticipated non-linear biological effects, we are now entering a regime in which engineering may have to solve medical problems, that are largely endemic and possibly more predictable.

If disease is a hardware issue -  mainly wear and tear from use and the crumbling of the plumbing infrastructure, unable to remove waste from the system at a sustainable rate, then, perhaps we should approach problems with an engineering mindset. Thus far, engineers have been largely focused on the delivery of agents to more specific targets in an efficient and convenient way but it may be time to focus on the repair of systems and the removal of waste by mechanistic means. God’s delicate design has been beyond comprehension for humans to manipulate deterministically and they have succumbed to a game of probability and serendipity to solve medical problems. However, if problems are endemic, then they are likely more forecastable and the solutions to them, more systemizable. In this area, humans have been brilliant as they have been making tools for millions of years and mechanical plumbing systems, bit more recently.

Diseases of the body and the solutions to them may be sought by well established engineering techniques, ushering in a regime of mechanistic preventative maintenance at predictable time intervals.

(1) Solving the mystery of an old diabetes drug that may reduce cancer risk. Published: Wednesday, January 18, 2012 – 17:39 in Health & Medicine. Source: McGill University

Tick tock, early death

Research from Oregon State University (1) shows that the flaws and the failure in the circadian rhythms can be attributed to neurodegeneration and early death. Impaired biological clocks seem to unleash a series of events with negative effects on the brain and health in general. Although the study does not address this, one has to wonder the possible negative effects on the human psyche from lack of sleep, international travel and overworking.

Humans arrived on the earth, a few thousands years ago, when it served up an environment of predictable cycles. They acclimatized with it and grew in tune with the sun – their bodies expecting highly predictable rhythms. They hunted when there was light and hid from predators at night. They slept when it was safe to sleep and did not when it was not so. The whole human system is built up on highly predictable rhythms, driven by the sun and the moon. Modern human, changed all of these – ushering in a series of diseases – that are generally called auto-immune diseases. They won the battle against the bugs but they lost the war against themselves.

At the present rate, it is likely that most humans will face a form of auto-immune disease before their death. In the future, it is most likely a disease of the brain will be the cause of death as most others can be solved mechanistically. The brain still remains beyond the grasp of the mighty human.

(1) Loss of circadian clock accelerates aging in neurodegeneration-prone mutants. Authors: Krishnan, Natraj,Rakshit, Kuntol,Chow, Eileen S.,Wentzell, Jill S.,Kretzschmar, Doris,Giebultowicz, Jadwiga M. 

Citation URL: http://hdl.handle.net/1957/26511

Pricing whales

In the recent edition of Nature, researchers suggest a creative way to reduce whaling – by a market based cap and trade system (1,2). Although some may object to this idea as insensitive, it makes good sense. The optimal societal outcome is the maintenance of the number of whales that will keep the possibility of extinction of them to close to zero. The researchers point out that environmental groups spend close to $25 Mil per year campaigning against the whaling industry that makes a profit of $31 Mil. In effect, the whole problem can be solved if the environmentalists hand over $25 Mil to the whalers every year. This will assuredly stop all whaling. However, this is unlikely to happen. Also, it may not be an optimal outcome as the stoppage of whaling and a sudden rise in their population can have unanticipated impacts on the whole system.

Setting a price for the bad (in this case, whaling) and designing a cap and trade system is the next best solution. The number of whales that can be captured per year may be capped based on the current population of the different types of whales. Such a cap then will force a market based price and a flow of the right to capture whales to the most efficient whaling organization. It also allows flexible policy that can assure healthy numbers of all types of whales and the possible elimination of the system when the numbers are above a calculated threshold.

Policy makers have to think creatively to solve problems. The amount of resources expended to defend or attack binary policy choices is a lot higher than what is needed to implement market based solutions in most areas.

(1) comment in  Nature entitled “Conversation Science: A market approach to saving the whales,” Christopher Costello and Steven Gaines of the University of California, Santa Barbara, and Leah Gerber of Arizona State University, Tempe

(2) Science Insider, by Erik Stokstad on 11 January 2012, 4:08 PM

Privacy protection

A recent article (1) describes how an individual’s privacy can be assured in a database with a restriction on aggregate queries that are allowed. In a database allowing aggregate cross-sectional queries, information at the element level can be revealed by sub segmentation. The suggested solution provides bounds on queries that return subsets with individual information revelation.

Research in this area has been lagging. Most of the effort is currently expended in the collection, aggregation and reporting of information without sufficient concern for the privacy of such information. There are two fundamental avenues of research in this general area. First, one has to create a mathematical foundation for the determination of the minimum amount of data at the individual level (to be stored) that is necessary and sufficient to complete the task at hand and second, one has to determine decision quality or the ability to use all available information in the decision process as a function of stored data. There have been two weaknesses in this process. There is a tendency to collect whatever data are available first and ask questions later as the cost of collection and storage decline fast (2) and most of the stored information is never used in the decision process. This has created problems not only for reaching better decisions but also in the protection afforded. This is because, highly segmented datasets provide less protection against accidental revelation of information as well as planned ones.

Better designs are needed in the definition of necessary and sufficient data, decision processes that operate on such data to improve decision quality and databases that automatically prevent information revelation.

(1) Protecting confidential data with math. Published: Friday, December 16, 2011 – 12:37 in Mathematics & Economics. Source: Society for Industrial and Applied Mathematics

(2) Flexibility: Flexible Companies for the Uncertain World. http://www.routledge.com/books/details/9781439816325/

The church of pharmaceuticals

A recent study in the Journal of Consumer Research from the University of Chicago Press (1) demonstrates that people hold management policies of churches and pharmaceutical companies to a higher standard. For example, outsourcing of priestly activities by the church to become more efficient or actions to maximize shareholder value by pharmaceutical companies such as hiking the price of well known drugs meet with sharp disapproval of the public, even though such actions are routinely taken by companies in most other industries without any objections or fanfare. So, public, in general, will vote to control the prices of drugs without knowing that such actions will slowly erode the ability of the industry to bring new products to market.

This shows that perceptions and biases are important factors that generate public opinion. Democratic outcomes, thus, are not objective – they are but a reflection of the existing belief systems. Challenging such belief systems, generally, is not a winning formula as humans have shown little ability to change their biases in the presence of data that conflict with belief systems. In many cases, conflicting data reinforces false beliefs. Equally important is the need and desire to conform. If an individual knows that a higher share of the society believes in something, it is more likely that she will conform rather than object.

Education systems around the world has to reform significantly. The best part of education is learning to challenge status-quo and to use logic to study belief systems. Without such skills, the next generation will remain prisoners to arbitrary beliefs perpetuated by the generations before them.

1. From the Commercial to the Communal: Reframing Taboo Trade-offs in Religious and Pharmaceutical Marketing. A. Peter McGraw, Janet A. Schwartz, Philip E. Tetlock