Covering the bases

When I first started out in my consulting business I found it quite confronting to charge an hourly rate that was high enough to cover the bases. I started with a lower rate, and quickly discovered it wasn’t enough, but I found it challenging to raise it, mostly due to my perspective on what the rate “meant.” I found a simple trick to help me shift my perspective, and better work out what I needed to charge to make the business stack up.

Annandale brick in the wall…

I’m a fan of live music. I am a musician and count on venues to remain viable as an outlet for my artistic expression. The Annandale is a long-running venue in Sydney’s inner-west. I’ve played there, and seen countless great gigs there. It would be a great shame to see it close, especially so to make way for residential apartments.

The Annandale recently launched a “buy a brick” campaign, where fans of the venue can contribute $20–250 to get their name on a plaque at the venue. This is to help reduce debt and upgrade facilities.

At face value, this seems like a great thing to contribute to — a way of supporting live music into the future. Especially important with venues like the Hopetoun having shutdown some months ago and there being very few venues around in the inner-city continuing to support live music.

But… I have a doubt. As the FasterLouder article (linked above) notes, the venue has been under the same management for 10 years. There is no indication anywhere in the article, nor the Annandale’s campaign page, is how the Rule brothers intend on actually turning around the fortunes of the hotel (e.g. get it out of debt and into a sustainable, viable ongoing concern).

I assume (though it’s not clear) that the “membership” system is one of renewing annual membership. It’s not clear how much money the scheme is intended to raise. There’s no indication as to the level of debt that needs to be cleared, or how much the upgrades are going to cost and thus how much the scheme will likely assist in achieving this goal. While I’m sure it was a last ditch effort to avoid foreclosure, selling the poker machines has devalued the venue and removed an important revenue stream — this seems like a very short-sighted and ultimately detrimental decision.

I want to support this initiative. But I want to know my money is going to actually create the desired outcome — a vibrant, ongoing, sustainable Annandale hotel. Unfortunately, based on the information provided to date it’s hard to say whether this would be a worthwhile thing to put my money into. Not because I don’t care, but because I don’t know if it would actually work/help.

This is the second crowdsourcing project that I’ve seen that has suffered from this problem. also put the call out to supporters to bankroll it for a year, with promises of “bold plans” for becoming an ongoing, sustainable journalistic enterprise. These bold plans never materialised (unless the odd sponsorship/prize draw are the extent). Promises of a new site design and mobile tools never seemed to come about. A year rolled by and NewMatilda were again asking for support. Without any sense that the organisation is self-sustaining on the basis of anything but an annual membership drive makes it a harder to support.

If you’re going to enlist the support of the “crowd”, you really need to communicate your plans and increase your transparency so that we can make an informed judgement. Be honest about what your plans are, and honest when you aren’t able to deliver on them.

I will be keeping an eye on the Annandale project — I do hope that more details come to light so that I can count myself among their supporter/membership base. But until then, my contribution will be limited to being an interested bystander…

Career directions…

Over the Christmas break I’ve been thinking a lot about my career direction. This past year (2011) has been on the rough side, with some significant cashflow challenges which have kept me up at night and impacted my personal relationships. While things are looking more positive coming into the new year, I have been seriously questioning whether the direction of the business is taking is the right one — is the outcome worth having another year like last year?

I remember reading (or hearing at one of the many social innovation events) last year that if you’re interested in pursuing social innovation you should seek out a societal problem that you would like to see fixed and start to innovate around it. I wondered what social need my business — a professional services company that ostensibly is focusing on the corporate sector — was really addressing?

I soon came to the conclusion that the social need is that the corporate sector is the cause (directly or indirectly) of many of the environmental, and in some cases social, issues we face as a community. And that, by and large, the business community is not moving quickly enough to address these challenges — especially when we consider carbon emissions and environmental over-consumption.

I see a lot of great ideas in the social innovation community (and more widely) that are starved for funds and support. Where tens of thousands of dollars are all that’s needed to get something off the ground and test a new, innovative concept. Conversely, in my professional experience I have also seen significant sums of money wasted on ill-thought-through campaigns, products and services. What if some of that poorly invested money (which is small fry in the context of the kinds of projects I’ve witnessed go awry) was instead directed towards these projects that create social good?

So, there are two parts to the challenge — one is how can we innovate to bring a meaningful number of the business community to a new perspective? The second is how we can effectively direct capital to projects (and the people behind them) to create social good? And, more powerfully, how could we do both at once?

One approach is to consult to business to assist them in the transition to what I’ve previously called the “Economy of Meaning”. Leveraging the interest and commercial promise of things like social media to start a dialogue about creating more meaningful innovation. Framing a message around innovation, or reduction of risk etc. that is resonant with the broader social goals. I can’t help but think, though, that this is trying to sell something to a group that are, by-and-large, not really all that interested. That the drive for profit and financial reward is the wrong lever to be pulling to get meaningful and lasting change.

This is also a challenge for me as it requires me to explicitly outline and communicate what is an intuitive sense for the most part, that the concepts, models, methods and approaches that I have in mind, based on my professional and personal experience, are the way of the future. Unfortunately, there are very few hard-nosed case studies that demonstrate this at present.

Another approach, then, which I’ve started down the path of in the past, is to create an exemplar business that embodies these principles and practices — to become the case study. This requires a very different way of looking at the problem space, and instead identify business opportunities that are more public-facing (rather than business-to-business). Such opportunities also require a significant degree of capital, especially during the early stages of development where cashflow is unlikely to cover the investment of time and $$ to get a concept off the ground. And it requires a tonne of energy (which I must admit, I don’t really have right now…)

Even just finding the time to build the business case and prototype some ideas without adequate capital to cover the cashflow hit is a challenge. And to do this would require a strong commitment to the concept to get over what Seth Godin calls the dip. I’m yet to come across an idea that I feel so strongly about that I can unequivocally commit to it. And the few ideas I have in mind would require some time to develop initial prototypes, concepts and business plans to get to that point (or at least determine that they’re not viable/something that I’m willing to commit to).

I’m not sure that a professional services company is the right vehicle for achieving these goals. In fact, I’m pretty sure it’s not (at least not in the traditional model). But in the short-term it seems the most appropriate option, until I can find that concept that really resonates, that I believe in strongly enough to grow.

Hopefully in clarifying the purpose and aims (as outlined above) I can start to think more creatively about what form that business might take and begin to work towards that bigger vision…

Hydrogen car future?

I was interested to read Dan Gray’s take on the Top Gear team’s enthusiastic reception of the hydrogen fuel-cell Honda Clarity — suggesting that such a response in such a mainstream channel was a “profound” moment.

My interpretation of Dan’s key point is that the Honda is “just like the car of today” and therefore would be more accepted by the average punter due to reduced barriers (at least perceived barriers) of filling up and the speed of refuelling.

I have to respectfully disagree with the notion that hydrogen fuel cell vehicles will create a significant impact in the mainstream market (at least in the short- to medium-term — e.g. 5–10 years), and would like to throw a few points forward as to why I think electric vehicles, using battery technology, is more likely to become the new standard for cars in that period.

  • While most manufacturers have been working on hydrogen powered vehicles for some time, most have seemingly reduced their investment due to a number of critical issues (some of which I’ll expand on below).  On the flipside, most major manufacturers (Nissan, VW, Audi, GM to name just a few) have announced electric drive-train vehicles, or at least plug-in hybrids (in the case of Toyota and GM), as their preferred platform for alternative vehicle systems.  In the case of GM and Nissan, plans are to have production-ready vehicles as early as next year.  Honda is, I think, the only maker continuing to actively promote hydrogen fuel-cells as their platform of choice.
  • The infrastructure for electric vehicles already exists to a degree that is suitable for most people’s driving patterns (< 50 miles per day) — and it’s sitting in every person’s garage.  Additional infrastructure for in-transit recharging is required, but not as critical, for these common trips.  That’s what allows Tesla and Nissan to launch electric vehicles within a 12 month time-frame, not 5 or 10 years.  Hydrogen vehicles will need significant investment in hydrogen fuel distribution before the first vehicle can roll off the line.  This is what really annoyed me about Top Gear’s coverage — it completely ignored the fact that hydrogen vehicles can’t operate in the same way as petrol-fueled vehicles until this infrastructure is in place, and it will be sporadic at best in the early stages of deployment, in which case it has exactly the same issues as they claimed for electric vehicles.
  • Hydrogen fuel generation is an energy-intensive process, and my understanding is that it is far less efficient than battery technology in terms of energy conversion (i.e. while hydrogen has more energy per unit of storage, creating the fuel is less efficient than charging a battery).  For example, see the “Efficiency” section of this article for a summary — approx 22% efficiency for fuel cells vs. 85% for batteries.  Another paper (PDF 66 KB) from the European Fuel Cell Forum estimates the ratio as 22% vs. 66% respectively.  While I’ve read of some promising advances in using biological and chemical processes to generate hydrogen, these are still very experimental and are some years off production-ready.
  • Battery-powered vehicles can take advantage of long-running trends in battery technology improvement that is shared across the consumer electronics, electrical-industrial production and other industries.  Portable hydrogen fuel-cells are (mostly) automotive industry specific, which has a big potential to impact economies of scale and innovation moving forward.
  • Innovative concepts such as A Better Place are trialling alternative models to reduce the “recharge” time to an average of a a minute (technically this is not recharging — they switch over batteries that have been charged over a longer period).  While A Better Place relies on significant infrastructure investment, the experience will be closely equivalent to “refuelling”, overcoming the cognitive barriers that the Top Gear team claim hydrogen overcomes.  In other words, there’s more than one way to respond to the barriers to extending travel distance for battery-based vehicles.

Most importantly, though — electric vehicles and related technologies are available today and are viable given current infrastructure for a significant proportion of every-day use.  They are also a lot less expensive than hydrogen-based vehicles to produce, bringing them into range of conventional vehicles on a total cost of ownership basis, and even more so with government clean-vehicle subsidies (where available).  Economies of scale and technology improvements are likely to close the existing gap pretty rapidly.

As an aside, I think there are other significant issues with comparing the Tesla Roadster with the Clarity, especially in the context of a program like Top Gear.  For a start, the Tesla is a sports car, built on a Lotus rolling chassis modelled on the Elise, and the Top Gear team did give it a thrashing — I doubt expectations of performance would be so high for the Clarity.

As a counter-point to the finding that the battery lacked staying power, a Tesla Roadster here in Australia completed 500+ km (300 miles) on a single charge.  Additionally, the Tesla is the first vehicle from a new manufacturer that is deliberately provocative (thus the sports car styling and positioning that makes it much more expensive than comparable vehicles), and pioneered a new approach to battery technology that future electric vehicles are leveraging to achieve rapidly increasing ranges.

I think that a comparison between the Clarity the up-coming Tesla S will be a much fairer comparison, and the S will be taking advantage of newer battery technology and much learning by Tesla from the experience of developing, producing and rolling out the Roadster, so is likely to perform better on many levels.

One last gripe with the Top Gear comparison — Jeremy took great pleasure in dissing the Tesla for its likely reliance on coal-powered electricity, which of course also produces greenhouse gas emissions.  This is demonstrably misleading.  Based on the US energy mix an electric vehicle, even if powered by coal-generated electricity, an electric vehicle still achieves approx. 30% less emissions.  Buyers can choose GreenPower (offset) or have renewable capacity installed — in fact I believe that Tesla offer solar and renewable energy options as part of the purchase of the vehicle in the US — and given both the price premium and the nature of the market for such a vehicle, one would expect most owners would opt for a zero-emissions option.

Old ideas painted new

Over the past few years I’ve been following the automotive industry, especially in relation to electric cars and efficiency improvements.  I have had a long time love of cars from an aesthetic/design perspective, probably rooted in the many drawings and lego vehicles I made when I was a kid.

Perhaps it was watching Who Killed the Electric Car, the talk of biofuels (and their positive and negative aspects) and hydrogen (with many questions relating to hype vs. reality) – I’m not sure which, but something clicked over the past few years that really opened my eyes to just how little innovation had actually been happening in the space, and I suppose piqued my interest from a sustainability perspective.  I also think that the industry is somewhat of a bellweather for the broader market shift to sustainable technologies.

I was interested to note that this week Lotus Engineering have unveiled a concept car design, based on the Toyota Venza, that achieved a 30% weight reduction – a critical component of efficiency – over the Toyota design.

2020 Toyota Venza concept by Lotus Engineering reports:

With a combination of lightweight materials and efficient design, Lotus claims to have achieved a 38 per cent reduction in vehicle mass, excluding the powertrain, for only a three per cent increase in component costs.

In other words, the Venza’s 1290kg mass was reduced to just 800kg on the Lotus-engineered 2020 concept.

… The company’s findings were released this week by the International Council on Clean Transportation and show how significant reductions in fuel consumption and CO2 emissions can be achieved for a regular mass-market vehicle through means other than the powertrain.

(egmCarTech has published an article of their own exploring the concept with further pictures.)

Over the past few weeks I’ve been reading the excellent book Natural Capitalism by Paul Hawkins and Amory and L. Hunter Lovins.  In the chapter entitled Reinventing the Wheels the authors outline how lighter materials, better aerodynamics and alternative drive-trains (hybrid-electric) can radically improve the efficiency of cars.  They call this concept the “Hypercar”, and note:

Detroit has long focused on improving the efficiency of the drive-line – the fraction of the fuel’s energy that’s converted by the engine into torque and then transmitted by the drivetrain to the wheels.  But there is an even better approach.  The Hypercar concept attacks the problem from the other end, by reducing the amount of power that is needed at the wheels in the first place.

They go on to outline how efficient use of more expensive but lighter, stronger and more adaptable materials can reduce weight and manufacturing complexity with only mild increases in costs while at the same time reducing the resource intensity (how many resources are required in energy, labour and natural resources) of the car.  Lotus’s concept seems to be taking this approach directly:

Still committed to founder Colin Chapman’s ethos of “performance through light weight”, Lotus Engineering says the 2020 vehicle architecture uses a mix of stronger and lighter weight materials, a high degree of component integration and advanced joining and assembly techniques.

Whereas the benchmark Venza’s body-in-white contained more than 400 parts, the 2020 model reduced that number to 211.

Body materials in the Venza were 100 per cent steel, while the 2020 concept uses 37 per cent aluminium, 30 per cent magnesium, 21 per cent composites and seven per cent high-strength steel – which Lotus says reduces the structure mass by 42 per cent, from 382kg to 221kg.

This is great news, and fantastic that Lotus is taking the initiative.  It’s noteworthy, I think, that Lotus are heavily involved in Tesla Motors‘ development.  However, I can’t help but have a twinge of disappointment that it’s taken over 10 years since Natural Capitalism was written (it was first published in 1999) for these techniques to be seriously considered, for a 2017 horizon.

Perhaps the technology and costs are only just starting to catch up to the vision, but I suspect it has more to do with the recent spur of activity in the automotive industry around electric vehicles that have resulted in this approach being applied.

Hopefully more of the ideas in the book start to come to fruition in the same way soon…

SMEs and environmental management

I’ve just completed my first “official” assessment item for my uni course, and I wanted to share it here for my own future reference, and because it may have potential interest to readers as well. It’s called Opportunities and challenges related to SME implementation of EMSs (PDF 176 KB) – and fair warning, it’s not exactly bed-side reading 😉

The format of the assessment restricted the length to 3000 words, though I could have gone into a lot more detail on a number of the points raised in the paper.

In particular I’m disappointed I couldn’t go into more detail about some of the thoughts I had relating to the implications of the findings and their application to encouraging SME uptake of sustainability practices. That said, I’m sure there’ll be plenty more opportunities throughout the course to do so.

As this was my first assessment, I think I overdid it on the reading front which was reflected in the ridiculous length of the first draft! All the same I really enjoyed all that extra reading – it’s more that I need to balance that with actually getting the writing done. Lesson learnt for next time I suppose.

Anyways, I hope it’s of interest and use. Now onto the next one…

EP progress/budget

In a previous post I outlined the costs of recording an independent EP, and hinted that with Fuzu‘s second EP we were trying to significantly reduce our costs.

Some friends who read the post found it useful, and I’ve also participated in some further discussions on a related post over at new music strategies.

As we’ve just completed mixing and mastering (i.e. we’re close to finished the project) I thought it might be worthwhile looking at the costs so far…


Greed is good

I spotted these just before Christmas, but didn’t get around to blogging them:

Millionaires factory keeps smiling minus the bonuses.

A $1 BILLION cut in the bonus pool split by Macquarie Group’s 13,800 staff, including the controversial multimillion-dollar rewards received by its senior executives, helped the investment bank deliver a better-than-expected half-year profit, it emerged yesterday.

The cut still allowed for $1.3 billion to be distributed as bonuses – an average of $94,000 per employee. Of course this would be split more unevenly in practice. Before the cuts, the average would have been$173,000 per employee. Hardly “minus the bonuses” as the headline suggests…

But then comes the news:

Macquarie Bank sacks 100 investment bankers.

MACQUARIE Group has sacked almost 100 investment bankers and advisers in a savage day of job cutting across the diversified bank.

…There were suggestions yesterday that Macquarie could end up cutting up to 1000 of its 13,000 employees around the world.

$1.3 billion in bonuses (which of course must be much smaller than the company’s profits) followed by 100 sackings. Seems the “greed is good” mentality is still alive and well.

The cash bonus mechanism rewards short-term thinking with sometimes obscene amounts of cash. Seems to me if the bonus schemes were more long-term focused (e.g. share options and other mechanisms), rewarding employees based on the long-term profitability and viability of the business, perhaps the rush to sub-prime investments would have been tempered with more cautious risk analysis.

The lull

Given how quiet I’ve been around these parts of late, I thought I might post a quick “what’s been happening” post.

  • Fuzu have finished recording and mixing our second EP – tentatively titled “The Point”. We’ll be mastering later this month, and hopefully completing the artwork shortly after. I’ll hopefully have a follow-up to my budget post soon reflecting the actual budget.
  • I’ve been working solidly on two big projects (one for Inspire Foundation, another for UNSW. This has taken up a big chunk of my time (as one might expect) – but I hope to be a little less frantic come February.
  • Thanks mostly to Timo Rissanen, further work has been done on refining the pattern’s for Arketype’s first range, which will be launched for Winter 2010 now, instead of Summer 09/10 (I’ve been a bit too busy with the ‘day job’ and have missed some deadlines). We Buy Your Kids are working on the graphic designs for the range – I’m looking forward to seeing what they come up with given the logo treatment Sonny and Biddy, the duo behind WBYK, came up with (more on that front soon).
  • Holidays – I’ve taken 3 weeks off work to visit family in Queensland – which was a wonderful break (that’s not quite over yet…).

Recent reading

I’ve also been doing a lot of reading of more “popular science” accounts of network theory, prompted in part by an ABC doco on the topic, and also economics and the history of money. This was in part prompted when a friend of mine sent me this video on money.

After reading Peter Bernstein’s A Primer on Money, Banking, and Gold it seems that many of the claims in the video are reasonably accurate.

I also recently finished Clay Shirky’s Here Comes Everybody which looks at some of the societal changes being spurred on by networks. Especially interesting to me is the notion of “reduced transaction cost” for organising collective action.

George Soros’ The New Paradigm for Financial Markets was also an interesting read, albeit a bit repetitive. What’s most interesting is that an über-capitalist such as Soros would have such disdain for the models and assumptions underpinning the industry that he profited so well from.

Critical Mass by Philip Ball is a great overview of what he describes as an emerging “physics of society”. The book covers network and game theory, and emphasises the extent to which power laws and “phase transitions” apply to social phenomena. It also weaves into its narrative the ideas of many economic and social thinkers in history – which was fascinating to me as someone who’s not overly familiar with many of their contributions (at least not directly/explicitly).

Continuing the theme I’m currently reading Duncan Watts’ Six Degrees: The Science of a Connected Age. It delves much deeper into “small world” networks (popularised by the “Kevin Bacon” game) which are covered more lightly in Critical Mass.