China poses a key party to coping with the global warming situation. The Obama administration appears to be giving this a significant priority.
http://www.nytimes.com/2009/02/22/world/asia/22diplo.html?_r=1&hp
Saturday, February 21, 2009
Thursday, February 19, 2009
Barney Frank On the Stimulus and Bail-Out
A functional economy is important for the success of green energy and actions to limit emissions of greenhouse gases into the atmosphere. This is because the economy must be functional if the necessarily resources are to be mobilized in the required direction. Below are my notes of Barney Frank's talk on 2/19/2009. I planned to post some video and audio of the event. It depended on uploading speeds for blogspot, and unfortunately, blogspot flunked all tests for this effort.
7:30 Barney Frank arrives at Scituate High School and walks directly up to a chair and table on the stage, to the strong applause of those assembled. In the notes below, some parts are very detailed because the details were particularly important. Others are not included. For example, there were a lot of lines that led to laughter. Only some are noted.
Intro by Kevin McCarthy, Chair of South Shore Democratic Caucus.
[Two reporters from the Patriot Ledger are present, one whose deadline is at 10 p.m., an hour after the event closes. Captain Lou @ WATD-FM is in favor of the fishermen and does not believe that is a shortage of fish in the fisheries. He is one of three of us in the press section, and he plans to pose his questions to the Congressman after the formal program.]
My notes on the initial speech by Barney Frank:
We are in a period of American history that will be addressed by the history books. Comparable to the New Deal. There are also foreign policy issues, although not of the same magnitude as those that led to World War II.
Partisanship is a good thing as long as it does not become too extreme. Partisanship is means to make the debate more rational. Newt Gingrich tried to change what partisanship is. But Tip O’Neill and Ronald Reagan were friends in the evening. To Gingrich the opposing party were traitors, corrupt rather than honorable people who disagree. Tom Delay continued this. This notion of partisanship should be done away with but not replaced by mere amorphousness. There are very strong differences between the parties today, particularly in economics. [We need to let the partisanship display the differences between the parties, the way they tackle issues, and their results.]
We set up the bank bailout and were told [by the Bush administration] that we could not place restrictions (see also http://www.pbs.org/wgbh/pages/frontline/meltdown/). So we offered them half of the $700B and told them they could not get the other half unless we were satisfied with the way they used the first half. So when it came time for the second half, I told Paulsen that we were not satisfied and that he would not get the second half. Now the Obama administration will be working with the second half, and I think we are going to see the real differences between the parties.
There have been three periods in American history when innovative economic systems have emerged offering a greater degree of efficiency. The problem is that there are no rules to govern such new activity. Late 19th century offered oil, steel. What Roosevelt and Wilson did was to say these were good things, but there need to be rules such as anti-trust. The stock market was the next development and led to the corrections of the New Deal. If there are no rules, the lowest common denominator will win. The next period was “securitization.” This has enabled making bad decisions and then having means to spread it around. In the traditional way, when you get a mortgage, the bank gets its return when you pay it back. And because the bank took all the risk, it frisked you pretty well to make sure you would pay it back. And the banks were regulated, because the government is on the hook if you mess up, and that system has worked pretty well. And then the financial system was working pretty well and there were pools of money available that were not from deposits in banks, so loans became available from other institutions.
And then there was the Community Reinvestment Act in 1977. This affected only banks, not other kinds of institutions. So community banks are justifiably angry when they hear that banks are being blamed, because if only banks had been giving out these loans, we would not have had the subprime crisis, because they didn't make bad loans. Most of the loans that went bad were made by institutions outside the banking system, not covered by the Community Reinvestment Act. So then you ask: What is the point of selling loans to people who can't pay you back? Very simple. You sell the right to be paid back. That is called securitization, which is similar to the stock market. It does a lot of good, but it also does a lot of bad unless you regulate it.
The Conservative view it that it’s the government’s fault. You made the banks loan to poor people. But community banks were not the only ones that had trouble. Most loans that were made to people who could not pay back were from entities not covered by the legislation that called for loans to the poor.
So what is the advantage? You sell the right to be paid back. This is securitization and it spreads risk. If you make a loan and then sell the right to be paid back, then you can make more loans. But you have to be paid back for it to work, so there is also a potential problem here. Most people are much more careful with their own money than with others’ money. So the loan makers were not careful in making loans when they would not have to collect. And then people would sell them and buy them outside the regulated system. This is the problem.
If you think about it, it used to be that advisors would tell you that if you want to be adventurous, you can invest in stock, but if you want to play it safe, you would invest in bonds. But now, it is the reverse because of the new instruments including derivatives.
Securitization is good, but it needs to be regulated. There has been a whole set of activity going on entirely outside of regulation. Democrats believed that you should regulate this area. Alan Greenspan admitted that he had been fundamentally wrong not to regulate when he had the option to do so. In 1994, the last time that the Democrats controlled Congress, we passed legislation that was signed by Bill Clinton. It said that we were concerned about the many mortgages that were being let out by non-bank institutions. Would you please stop these loans from happening. Alan Greenspan said, and it is well established that he did , "No I won't do that. That's regulation and the market knows better than I do." His successor, Ben Bernanke, has issued rules using exactly the same authority and legislation governing his actions.
Then the second thing happened. There was a decision to foster home ownership among many more Americans. My role in this has been asserted, but let's discuss a little. I was one of the few politicians who was saying that helping lower income people to get mortgages is a bad idea, because putting people in a position with homes they cannot manage and loans they cannot pay off is not a good thing. One of the big fights I have had with the Bush Administration is "How do you get lower income people to buy homes." I believe that for many people, decent rental housing is the way to go. I had this argument with the Secretary of HUD for the Bush Administration. He said he was going to cut people off Section 8 for rental assistance after five years. He asked if I would support that, and I said "No." He said, "Why." I said, "What happens to them after five years. I'll support you in cutting them off if you'll support them in not being poor after five years." [extended laughter] So I said "What will happen to these families after five years if we don't help them?" He said, "We will help them become home owners." The problem came in 2004 when the Bush Administration ordered Fannie Mae and Freddie Mac to increase the number of mortgages they bought from people below the median income. Greatly increasing home ownership was going to be their social contribution. When they did that, we became worried, and in 2004-5 a group of us in the House, mostly Democrats but one Republican, frustrated by Alan Greenspan's refusal to use the authority given to him by Congress, tried to pass a law to prevent these subprime mortgages that were being granted. We were in the midst of negotiations when Tom Delay sent word to the chairman of the committee that I served on as a minority member, "Stop it. We're Repubicans. We don't do that." In 2007 when the Democrats won the majority and I became Chairman of the committee, we passed legislation. So the Republicans argue that in 1995 through 2006 when they controlled Congress, I stopped them. [laughter] Unfortunately, after we passed that legislation in the House, the Senate was only 51-49. In summary we had a refusal by the Conservatives to regulate the sub-prime instruments, and then we had a refusal by the Conservatives to regulate the financial instruments which packaged up those instruments and sold them all over the world. We are now in a difficult situation that we hope to get out of. I do believe the Economic Recovery Plan will be helpful. What President Obama did yesterday will be helpful.
We need to do things that make for transparency and foster trust. The person who is elected President in 2012 will be required to check with the analysis of the Congressional Budget Office to find out how much of the $700B has been recovered. If all of it has been recovered, fine. If not, then he is mandated by law to make a proposal to Congress as to how to get the shortfall back by taxes and fees from the financial industry, the industry that benefitted. Unless there are greater changes than I anticipate, I guarantee you that the Congress that is in power in 2013 will not say, "Oh no Mr. President. These nice people don't need to pay that. Let's have the American taxpayers pay that instead."
There are three things the Obama Administration is doing. We know how to make sure this does not happen again. The first is by regulation, sensible regulation. The right kind of regulation is pro-market. Investors bought all this securitized junk. When people touch the hot stove, they refuse to touch it again, and sometimes they refuse also to touch the refrigerator, the sink, the table, and a lot of other things. [laughter] We need to get people back from refusing to touch the stove again after being burned. Prevent loans from being given out to people who should not be getting loans. 2nd, when it comes to securitization, you cannot sell 100% of the right to be paid. Must keep 15% to 20% of the risk. We want these institutions to keep what some people call “skin” in the game. This is like in the insurance industry with respect to reinsurance. 3rd we will regulate the extent to which people can get themselves in debt. It will cover all types of businesses. If you regulate by type of business, pretty soon there will be a new type of business invented that is outside regulation. The idea is to prevent institutions to get so in debt that you could default leading to extensive collateral damage. One example of this is credit default swaps, which are really a form of insurance. I issue a credit default swap to you guaranteeing that your collateralized debt obligation derivative won't default. Usually, by the way, if you want to insure somebody, you have to have an insurable interest. You can't just go out and insure some stranger's life. [laughter] And you have to be able to show the regulator that you have the ability to pay off your insurance claims by some combination of your own capital and reinsurance. In the past the assumption was that these things would never default. It's kind of like you decided to go into the life insurance business issuing policies on vampires [laughter] and then the vampires started dying [more laughter]. That by the way, is why doing something about foreclosure is so important, because as the assets value deteriorates, a lot of people are in position to make payments that they cannot pay. We do want to slow that down. I should add, it was never the case that we should have stopped house prices from dropping in an orderly way. Housing prices had gotten to be too high. It's like, I'd like to lose 20 pounds, but not by Sunday. [laughter]
So we know what to do going forward. It was not deregulation but non-regulation that caused our problems. It is just like to twenties, and then Roosevelt established regulations for stocks.
Don’t be protectionist is what some people say. The average American is justifiably so angry at the unfairness of the way that the economy has worked: during the good times almost all the wealth went to a small handful of people. Trade helps the overall economy, but it does it in an uneven way. People with high end jobs make most of the money when there is trade. Warren Buffet: we have class warfare in America. My class is winning. [laughter] We need to maintain a safety net. What will reduce the resistance to free trade? I'll give you the most important thing. We need a system where people do not lose their healthcare when they loose their jobs. Stop fighting unions, which now turn out to have been a very useful thing. Put money into things like the community college system where people to develop skills for jobs.
And finally, some will ask where do you get the money for all of this? I was in Congress in September 10, 2001. I guarantee you that there was no money in the budget for a war in Iraq. Since that time we have found over $700B for a war in Iraq, and even though Obama is going to wind it down, it will get close to a trillion for now. When it comes time to find the money for better health care, education, and these things, I am going to go to the guy in Congress who found $700B for the War in Iraq, and $700B for the bail-out if he can find some. This is a very rich society. If we set our minds correctly to priorities, we can treat ourselves better than we have been treating ourselves.
Barney Frank talks on February 19, 2009 in constituent town meeting about the bank bailout. It starts with discussion of the actions of Bush's Secretary of the Treasury in giving $350B to large banks, and the reaction to that.
http://www.youtube.com/watch?v=ZsOZuE6s5P0
on banks and non-banks:
http://www.youtube.com/watch?v=3xQ8KNNRi5o
on credit card practices:
http://www.youtube.com/watch?v=2WJCpxyqsZU
These three videos provide a pretty good taste of what the event was like. They complement the text above.
7:30 Barney Frank arrives at Scituate High School and walks directly up to a chair and table on the stage, to the strong applause of those assembled. In the notes below, some parts are very detailed because the details were particularly important. Others are not included. For example, there were a lot of lines that led to laughter. Only some are noted.
Intro by Kevin McCarthy, Chair of South Shore Democratic Caucus.
[Two reporters from the Patriot Ledger are present, one whose deadline is at 10 p.m., an hour after the event closes. Captain Lou @ WATD-FM is in favor of the fishermen and does not believe that is a shortage of fish in the fisheries. He is one of three of us in the press section, and he plans to pose his questions to the Congressman after the formal program.]
My notes on the initial speech by Barney Frank:
We are in a period of American history that will be addressed by the history books. Comparable to the New Deal. There are also foreign policy issues, although not of the same magnitude as those that led to World War II.
Partisanship is a good thing as long as it does not become too extreme. Partisanship is means to make the debate more rational. Newt Gingrich tried to change what partisanship is. But Tip O’Neill and Ronald Reagan were friends in the evening. To Gingrich the opposing party were traitors, corrupt rather than honorable people who disagree. Tom Delay continued this. This notion of partisanship should be done away with but not replaced by mere amorphousness. There are very strong differences between the parties today, particularly in economics. [We need to let the partisanship display the differences between the parties, the way they tackle issues, and their results.]
We set up the bank bailout and were told [by the Bush administration] that we could not place restrictions (see also http://www.pbs.org/wgbh/pages/frontline/meltdown/). So we offered them half of the $700B and told them they could not get the other half unless we were satisfied with the way they used the first half. So when it came time for the second half, I told Paulsen that we were not satisfied and that he would not get the second half. Now the Obama administration will be working with the second half, and I think we are going to see the real differences between the parties.
There have been three periods in American history when innovative economic systems have emerged offering a greater degree of efficiency. The problem is that there are no rules to govern such new activity. Late 19th century offered oil, steel. What Roosevelt and Wilson did was to say these were good things, but there need to be rules such as anti-trust. The stock market was the next development and led to the corrections of the New Deal. If there are no rules, the lowest common denominator will win. The next period was “securitization.” This has enabled making bad decisions and then having means to spread it around. In the traditional way, when you get a mortgage, the bank gets its return when you pay it back. And because the bank took all the risk, it frisked you pretty well to make sure you would pay it back. And the banks were regulated, because the government is on the hook if you mess up, and that system has worked pretty well. And then the financial system was working pretty well and there were pools of money available that were not from deposits in banks, so loans became available from other institutions.
And then there was the Community Reinvestment Act in 1977. This affected only banks, not other kinds of institutions. So community banks are justifiably angry when they hear that banks are being blamed, because if only banks had been giving out these loans, we would not have had the subprime crisis, because they didn't make bad loans. Most of the loans that went bad were made by institutions outside the banking system, not covered by the Community Reinvestment Act. So then you ask: What is the point of selling loans to people who can't pay you back? Very simple. You sell the right to be paid back. That is called securitization, which is similar to the stock market. It does a lot of good, but it also does a lot of bad unless you regulate it.
The Conservative view it that it’s the government’s fault. You made the banks loan to poor people. But community banks were not the only ones that had trouble. Most loans that were made to people who could not pay back were from entities not covered by the legislation that called for loans to the poor.
So what is the advantage? You sell the right to be paid back. This is securitization and it spreads risk. If you make a loan and then sell the right to be paid back, then you can make more loans. But you have to be paid back for it to work, so there is also a potential problem here. Most people are much more careful with their own money than with others’ money. So the loan makers were not careful in making loans when they would not have to collect. And then people would sell them and buy them outside the regulated system. This is the problem.
If you think about it, it used to be that advisors would tell you that if you want to be adventurous, you can invest in stock, but if you want to play it safe, you would invest in bonds. But now, it is the reverse because of the new instruments including derivatives.
Securitization is good, but it needs to be regulated. There has been a whole set of activity going on entirely outside of regulation. Democrats believed that you should regulate this area. Alan Greenspan admitted that he had been fundamentally wrong not to regulate when he had the option to do so. In 1994, the last time that the Democrats controlled Congress, we passed legislation that was signed by Bill Clinton. It said that we were concerned about the many mortgages that were being let out by non-bank institutions. Would you please stop these loans from happening. Alan Greenspan said, and it is well established that he did , "No I won't do that. That's regulation and the market knows better than I do." His successor, Ben Bernanke, has issued rules using exactly the same authority and legislation governing his actions.
Then the second thing happened. There was a decision to foster home ownership among many more Americans. My role in this has been asserted, but let's discuss a little. I was one of the few politicians who was saying that helping lower income people to get mortgages is a bad idea, because putting people in a position with homes they cannot manage and loans they cannot pay off is not a good thing. One of the big fights I have had with the Bush Administration is "How do you get lower income people to buy homes." I believe that for many people, decent rental housing is the way to go. I had this argument with the Secretary of HUD for the Bush Administration. He said he was going to cut people off Section 8 for rental assistance after five years. He asked if I would support that, and I said "No." He said, "Why." I said, "What happens to them after five years. I'll support you in cutting them off if you'll support them in not being poor after five years." [extended laughter] So I said "What will happen to these families after five years if we don't help them?" He said, "We will help them become home owners." The problem came in 2004 when the Bush Administration ordered Fannie Mae and Freddie Mac to increase the number of mortgages they bought from people below the median income. Greatly increasing home ownership was going to be their social contribution. When they did that, we became worried, and in 2004-5 a group of us in the House, mostly Democrats but one Republican, frustrated by Alan Greenspan's refusal to use the authority given to him by Congress, tried to pass a law to prevent these subprime mortgages that were being granted. We were in the midst of negotiations when Tom Delay sent word to the chairman of the committee that I served on as a minority member, "Stop it. We're Repubicans. We don't do that." In 2007 when the Democrats won the majority and I became Chairman of the committee, we passed legislation. So the Republicans argue that in 1995 through 2006 when they controlled Congress, I stopped them. [laughter] Unfortunately, after we passed that legislation in the House, the Senate was only 51-49. In summary we had a refusal by the Conservatives to regulate the sub-prime instruments, and then we had a refusal by the Conservatives to regulate the financial instruments which packaged up those instruments and sold them all over the world. We are now in a difficult situation that we hope to get out of. I do believe the Economic Recovery Plan will be helpful. What President Obama did yesterday will be helpful.
We need to do things that make for transparency and foster trust. The person who is elected President in 2012 will be required to check with the analysis of the Congressional Budget Office to find out how much of the $700B has been recovered. If all of it has been recovered, fine. If not, then he is mandated by law to make a proposal to Congress as to how to get the shortfall back by taxes and fees from the financial industry, the industry that benefitted. Unless there are greater changes than I anticipate, I guarantee you that the Congress that is in power in 2013 will not say, "Oh no Mr. President. These nice people don't need to pay that. Let's have the American taxpayers pay that instead."
There are three things the Obama Administration is doing. We know how to make sure this does not happen again. The first is by regulation, sensible regulation. The right kind of regulation is pro-market. Investors bought all this securitized junk. When people touch the hot stove, they refuse to touch it again, and sometimes they refuse also to touch the refrigerator, the sink, the table, and a lot of other things. [laughter] We need to get people back from refusing to touch the stove again after being burned. Prevent loans from being given out to people who should not be getting loans. 2nd, when it comes to securitization, you cannot sell 100% of the right to be paid. Must keep 15% to 20% of the risk. We want these institutions to keep what some people call “skin” in the game. This is like in the insurance industry with respect to reinsurance. 3rd we will regulate the extent to which people can get themselves in debt. It will cover all types of businesses. If you regulate by type of business, pretty soon there will be a new type of business invented that is outside regulation. The idea is to prevent institutions to get so in debt that you could default leading to extensive collateral damage. One example of this is credit default swaps, which are really a form of insurance. I issue a credit default swap to you guaranteeing that your collateralized debt obligation derivative won't default. Usually, by the way, if you want to insure somebody, you have to have an insurable interest. You can't just go out and insure some stranger's life. [laughter] And you have to be able to show the regulator that you have the ability to pay off your insurance claims by some combination of your own capital and reinsurance. In the past the assumption was that these things would never default. It's kind of like you decided to go into the life insurance business issuing policies on vampires [laughter] and then the vampires started dying [more laughter]. That by the way, is why doing something about foreclosure is so important, because as the assets value deteriorates, a lot of people are in position to make payments that they cannot pay. We do want to slow that down. I should add, it was never the case that we should have stopped house prices from dropping in an orderly way. Housing prices had gotten to be too high. It's like, I'd like to lose 20 pounds, but not by Sunday. [laughter]
So we know what to do going forward. It was not deregulation but non-regulation that caused our problems. It is just like to twenties, and then Roosevelt established regulations for stocks.
Don’t be protectionist is what some people say. The average American is justifiably so angry at the unfairness of the way that the economy has worked: during the good times almost all the wealth went to a small handful of people. Trade helps the overall economy, but it does it in an uneven way. People with high end jobs make most of the money when there is trade. Warren Buffet: we have class warfare in America. My class is winning. [laughter] We need to maintain a safety net. What will reduce the resistance to free trade? I'll give you the most important thing. We need a system where people do not lose their healthcare when they loose their jobs. Stop fighting unions, which now turn out to have been a very useful thing. Put money into things like the community college system where people to develop skills for jobs.
And finally, some will ask where do you get the money for all of this? I was in Congress in September 10, 2001. I guarantee you that there was no money in the budget for a war in Iraq. Since that time we have found over $700B for a war in Iraq, and even though Obama is going to wind it down, it will get close to a trillion for now. When it comes time to find the money for better health care, education, and these things, I am going to go to the guy in Congress who found $700B for the War in Iraq, and $700B for the bail-out if he can find some. This is a very rich society. If we set our minds correctly to priorities, we can treat ourselves better than we have been treating ourselves.
Barney Frank talks on February 19, 2009 in constituent town meeting about the bank bailout. It starts with discussion of the actions of Bush's Secretary of the Treasury in giving $350B to large banks, and the reaction to that.
http://www.youtube.com/watch?v=ZsOZuE6s5P0
on banks and non-banks:
http://www.youtube.com/watch?v=3xQ8KNNRi5o
on credit card practices:
http://www.youtube.com/watch?v=2WJCpxyqsZU
These three videos provide a pretty good taste of what the event was like. They complement the text above.
Monday, February 16, 2009
Moratorium on Coal Plants?
From what I understand of James Hansen's work, and the implications as spelled out in earlier posts on this blog, our society and the entire world, must have a moratorium on coal plants starting now. I have not personally taken a position on that question because I recognize that forbearance can be a very important virtue as long as we move efficiently and rapidly toward reducing our overall carbon footprint. But as lawyers sometimes like to say, time is of the essence.
This from the New York Times: This green chorus also includes Al Gore, the former vice president, Eric E. Schmidt, the chief executive of Google, and Harry Reid, the Senate majority leader, who has called for a moratorium on new coal plants.
Is America Ready to Quit Coal?
http://www.nytimes.com/2009/02/15/business/15coal.html
Also possibly of interest in the article is the appearance of The Rising Tide, which made an appearance at the Harvard talk given by Steven Leer of Arch Coal. Here is the best picture I captured of that protest demonstration from my vantage point in the middle of the audience. The same New York Times article has this about their protest of Duke Energy's proposed coal-fired power plant:
Last May, protesters took over James E. Rogers’s front lawn in Charlotte, N.C., unfurling banners declaring “No new coal” and erecting a makeshift “green power plant” — which, they said in a press release, was fueled by “the previously unexplored energy source known as hot air, which has been found in large concentrations” at his home. And so it goes for Mr. Rogers, the chief executive of Duke Energy. For three years, environmentalists have been
battling to stop his company from building a large coal-fired power plant in southwestern North Carolina.
The interesting things about the Rising Tide demonstrations is that they are in at least two different geographical regions, and that they were both apparently very well planned. (You cannot set up shop on the front lawn of a CEO of a major company and have it witnessed without some skillful preparation.) See Natasha Whitney's article about the event in the Harvard Crimson (http://www.thecrimson.com/article.aspx?ref=526312). See the YouTube entry (http://www.youtube.com/watch?v=j-gaTWBptKE) for the Rising Tide video of the Harvard demonstration. The camera angle is excellent, the result of careful planning. The demonstration triggered during the time that a person from Rising Tide in the audience was asking some challenging questions. As a member of the audience, I was completely suprised when the demonstration suddenly unfolded. And when Dan Schrag of Harvard stood up to interrupt the demonstration and confront the questioner, the demonstrators folded their cards quickly and without dispute. Of course, the real deal is the influence of the YouTube video, and capturing that video is something that the protesters had already achieved. It was captioned and put up on YouTube in significantly less than 24 hours, further evidence of how well planned and executed the protest really was.
This from the New York Times: This green chorus also includes Al Gore, the former vice president, Eric E. Schmidt, the chief executive of Google, and Harry Reid, the Senate majority leader, who has called for a moratorium on new coal plants.
Is America Ready to Quit Coal?
http://www.nytimes.com/2009/02/15/business/15coal.html
Also possibly of interest in the article is the appearance of The Rising Tide, which made an appearance at the Harvard talk given by Steven Leer of Arch Coal. Here is the best picture I captured of that protest demonstration from my vantage point in the middle of the audience. The same New York Times article has this about their protest of Duke Energy's proposed coal-fired power plant:
Last May, protesters took over James E. Rogers’s front lawn in Charlotte, N.C., unfurling banners declaring “No new coal” and erecting a makeshift “green power plant” — which, they said in a press release, was fueled by “the previously unexplored energy source known as hot air, which has been found in large concentrations” at his home. And so it goes for Mr. Rogers, the chief executive of Duke Energy. For three years, environmentalists have been
battling to stop his company from building a large coal-fired power plant in southwestern North Carolina.The interesting things about the Rising Tide demonstrations is that they are in at least two different geographical regions, and that they were both apparently very well planned. (You cannot set up shop on the front lawn of a CEO of a major company and have it witnessed without some skillful preparation.) See Natasha Whitney's article about the event in the Harvard Crimson (http://www.thecrimson.com/article.aspx?ref=526312). See the YouTube entry (http://www.youtube.com/watch?v=j-gaTWBptKE) for the Rising Tide video of the Harvard demonstration. The camera angle is excellent, the result of careful planning. The demonstration triggered during the time that a person from Rising Tide in the audience was asking some challenging questions. As a member of the audience, I was completely suprised when the demonstration suddenly unfolded. And when Dan Schrag of Harvard stood up to interrupt the demonstration and confront the questioner, the demonstrators folded their cards quickly and without dispute. Of course, the real deal is the influence of the YouTube video, and capturing that video is something that the protesters had already achieved. It was captioned and put up on YouTube in significantly less than 24 hours, further evidence of how well planned and executed the protest really was.
Saturday, February 14, 2009
Changes in Patent Situation After Some Major Recent Decisions
The American Bar Association Midyear Meeting has been held February 11-17 in 
Boston. On Saturday, February 14 2009, afternoon panels led by Phil Swain and Marc Temin of Foley Hoag addressed new developments in the ways that patents can be invalidated. This represents an emerging critical dysfunction in the patent and litigation system. One speaker, Jerry Riedinger, likened recent developments re summary judgement in the case KSR International Co. v. Teleflex Inc. to the explosion of Mt. St. Helen. It was common knowledge that something was brewing, and then the mountain blew, creating a large, ugly hole. (Image from http://www.olywa.net/radu/valerie/StHelens.html.) The material addressed by 
this panel is critically important for green-ness because the shift to the new ways will require an immense amount of innovation. It is well known that a lot of the breakthrough innovation comes out of university research and small business. In the best world this grows into large companies or is merged with larger companies, leading to large scale commercialization. For this process to work successfully, it is critical that patent protection be effective. If the patent and courts systems are broken, there will not be a proper incentive for innovators, commercializers, or investors to proceed. Instead the coupon clippers will prevail.
As Randall Davis, MIT computer scientist put it during the first panel, "there is a lot of intellectual thrashing going on. There is a lot to computer software law that the court may not understand. It is time to expand the concept of computers and algorithms, which should not be tied to a physical machine." As Scott Alter put it, the Supreme Court has reached some novel decisions, and the "Circuit Court is reasoning too literally from out of date Supreme Court decisions simply to avoid being overturned." These are not decisions that necessarily have fundamental meaning in the long term. However, that does not mean that real decisions don't have real impacts on the parties involved in patent litigation.
In the following, much of the material is taken from the presentation of Jerry Riedinger of Perkins Cole. Keep in mind that although I have paid a lot of attention to legal matters since about 1984, I am not myself a lawyer, so any mistakes or misrepresentations are probably mine. If you are going to bet part or all of the farm, you should first consult a qualified lawyer.
This material is important because, to the extent that bad patents are reasonably invalidated, the entire system of intellectual property is strengthened, and innovation is encouraged. Further, to the extent that reasonable patents are invalidated using the increasingly strong tools to do so, much of the incentive to innovate for profit is eliminated.
One issue is combination patents in which a number of items of earlier art are assembled into a larger object or process for which the patent is sought. The watershed case in this domain is the Great Atlantic and Pacific Tea Company v. Supermarket Equipment Corp in 1950. The Court imposed the new idea that combinations are patentable "only when the whole in some way exceeds the sum of its parts." Related, "A patent for a combination which only unites old elements with no change in their respective functions ... obviously withdraws what is already known into the field of its monopoly." Now to the lay person, this makes a lot of sense, but it caused havoc in the legal system.
Thus, arguably, Congress passed the 1952 Patent Act, which in part tried to correct this Supreme Court decision. In a succession of additional decisions handed down Congress was essentially overruled by the court system, so that the A&P case continues to hold in modified version to this day. In Graham v. John Deere the courts found that "the revision was not intended by Congress to change the general level of patentable invention." In Anderson's-Black Rock the decision was that "A combination of elements may result in an effect greater than the sum of the several effects taken separately." In Sakraida the courts again found obviousness, because the invention "simply arranges old elements with each performing the same function it had been known to perform." Part of the problem here is that there is great ambiguity in the courts as to what constitutes an innovation that is sufficiently novel to produce this greater effect.
The political issue that leads to decisions tearing down issued patents is this. When a survey was performed to determine people's satisfaction with issued patents, the response was that 51% of those surveyed rated U.S. patent quality as "poor" or "less than satisfactory." (Of course the glass is also half full, but that is apparently not telling for the courts: 48.8% reported that issued patents were "satisfactory or "more than satisfactory." -- Interestingly, 0% reported that such patents were "outstanding." What does that say?)
My own questions about this would be the following. So what is surprising about half the people thinking that patents are OK and the other half thinking they are not? Half of the concerned people are patent holders, while the other half are in the position of needing a license. Why should what amounts to a perhaps biased interpretation of what is at best an informal survey (grousing and complaints as they are noticed) about an inherently political question lead the courts to tear down patents? Since when should the courts be run by complaints?
The history of cases yields a set of tools for invalidating patents. "Predictability" became a key test for determining whether a combination patent should be patentable. In KSR, "The combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results." Further, "If a person of ordinary skill can implement a predictable variation, section 103 likely bars its patentability."
Second, summary judgement which has historically been forbidden in patent litigation, has become accepted. In KSR again, "Where ... the content of the prior art, the scope of the patent claim, and the level of ordinary skill in the art are not in material dispute, and the obviousness of the claim is apparent in light of these factors, summary judgement is appropriate." This shockingly also places into the hands of a judge, who may have no technical skills and who may act alone, whether a patent involves obviousness.
As summarized by Jerry Riedinger of Perkins Cole, there appear to be four points in predicting obviousness:
More may be coming.
Boston. On Saturday, February 14 2009, afternoon panels led by Phil Swain and Marc Temin of Foley Hoag addressed new developments in the ways that patents can be invalidated. This represents an emerging critical dysfunction in the patent and litigation system. One speaker, Jerry Riedinger, likened recent developments re summary judgement in the case KSR International Co. v. Teleflex Inc. to the explosion of Mt. St. Helen. It was common knowledge that something was brewing, and then the mountain blew, creating a large, ugly hole. (Image from http://www.olywa.net/radu/valerie/StHelens.html.) The material addressed by 
this panel is critically important for green-ness because the shift to the new ways will require an immense amount of innovation. It is well known that a lot of the breakthrough innovation comes out of university research and small business. In the best world this grows into large companies or is merged with larger companies, leading to large scale commercialization. For this process to work successfully, it is critical that patent protection be effective. If the patent and courts systems are broken, there will not be a proper incentive for innovators, commercializers, or investors to proceed. Instead the coupon clippers will prevail.As Randall Davis, MIT computer scientist put it during the first panel, "there is a lot of intellectual thrashing going on. There is a lot to computer software law that the court may not understand. It is time to expand the concept of computers and algorithms, which should not be tied to a physical machine." As Scott Alter put it, the Supreme Court has reached some novel decisions, and the "Circuit Court is reasoning too literally from out of date Supreme Court decisions simply to avoid being overturned." These are not decisions that necessarily have fundamental meaning in the long term. However, that does not mean that real decisions don't have real impacts on the parties involved in patent litigation.
In the following, much of the material is taken from the presentation of Jerry Riedinger of Perkins Cole. Keep in mind that although I have paid a lot of attention to legal matters since about 1984, I am not myself a lawyer, so any mistakes or misrepresentations are probably mine. If you are going to bet part or all of the farm, you should first consult a qualified lawyer.
This material is important because, to the extent that bad patents are reasonably invalidated, the entire system of intellectual property is strengthened, and innovation is encouraged. Further, to the extent that reasonable patents are invalidated using the increasingly strong tools to do so, much of the incentive to innovate for profit is eliminated.
One issue is combination patents in which a number of items of earlier art are assembled into a larger object or process for which the patent is sought. The watershed case in this domain is the Great Atlantic and Pacific Tea Company v. Supermarket Equipment Corp in 1950. The Court imposed the new idea that combinations are patentable "only when the whole in some way exceeds the sum of its parts." Related, "A patent for a combination which only unites old elements with no change in their respective functions ... obviously withdraws what is already known into the field of its monopoly." Now to the lay person, this makes a lot of sense, but it caused havoc in the legal system.
Thus, arguably, Congress passed the 1952 Patent Act, which in part tried to correct this Supreme Court decision. In a succession of additional decisions handed down Congress was essentially overruled by the court system, so that the A&P case continues to hold in modified version to this day. In Graham v. John Deere the courts found that "the revision was not intended by Congress to change the general level of patentable invention." In Anderson's-Black Rock the decision was that "A combination of elements may result in an effect greater than the sum of the several effects taken separately." In Sakraida the courts again found obviousness, because the invention "simply arranges old elements with each performing the same function it had been known to perform." Part of the problem here is that there is great ambiguity in the courts as to what constitutes an innovation that is sufficiently novel to produce this greater effect.
The political issue that leads to decisions tearing down issued patents is this. When a survey was performed to determine people's satisfaction with issued patents, the response was that 51% of those surveyed rated U.S. patent quality as "poor" or "less than satisfactory." (Of course the glass is also half full, but that is apparently not telling for the courts: 48.8% reported that issued patents were "satisfactory or "more than satisfactory." -- Interestingly, 0% reported that such patents were "outstanding." What does that say?)
My own questions about this would be the following. So what is surprising about half the people thinking that patents are OK and the other half thinking they are not? Half of the concerned people are patent holders, while the other half are in the position of needing a license. Why should what amounts to a perhaps biased interpretation of what is at best an informal survey (grousing and complaints as they are noticed) about an inherently political question lead the courts to tear down patents? Since when should the courts be run by complaints?
The history of cases yields a set of tools for invalidating patents. "Predictability" became a key test for determining whether a combination patent should be patentable. In KSR, "The combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results." Further, "If a person of ordinary skill can implement a predictable variation, section 103 likely bars its patentability."
Second, summary judgement which has historically been forbidden in patent litigation, has become accepted. In KSR again, "Where ... the content of the prior art, the scope of the patent claim, and the level of ordinary skill in the art are not in material dispute, and the obviousness of the claim is apparent in light of these factors, summary judgement is appropriate." This shockingly also places into the hands of a judge, who may have no technical skills and who may act alone, whether a patent involves obviousness.
As summarized by Jerry Riedinger of Perkins Cole, there appear to be four points in predicting obviousness:
- Is the invention understandable to lay people?
- Is the invention visually similar to prior art?
- Does a written explanation in the prior art seem to describe the invention?
- Do two out of three experts say the invention was predictable?
More may be coming.
Friday, February 6, 2009
Arch Coal at Harvard
In this post I am going to review some of the presentation of Steven Leer, CEO and Chairman of the Board at Arch Coal in St. Louis. First let me address a question that many have up front in relation to coal and coal mining. In response to a question from the audience, Steven stated that his company no longer does open-pit coal mining on mountains with drag lines in West Virginia, and they have left those old pits looking like rolling fields with grass. A later conversation with a colleague suggested that the hills might be heaps of "glop." The larger point however would be that Arch Coal by this account is quite different from many minerals companies that Jerrod Diamond describes as going bankrupt once they have extracted their riches, and leaving the cleanup to the local communities, the states, and the Federal government.
Although Leer's presentation focused on a justification for coal and carbon capture and sequestration (CCS) in our modern world, there was one key implicit point -- that it is critical to enable CCS. This might be seen purely as a self-serving argument for a coal company to make, since it would serve to extend the lifetime of coal in a world increasingly threatened by global warming. If I may draw an analogy to bridge, Leer's presentation within its own frame presents a strong argument for our society to continue to embrace coal as a fuel. It is available and cheap, and it is one of many fuel sources, none of which can supply the entire needs of our society. For some time the coal industry has been winning trick after trick within this suit. However, that argument is now being trumped by the limitations imposed by Mother Earth. One strand of thought among members of the audience was that the new trump suit would now take all the tricks, but there is yet another trump suit that may in certain situations trump the environmental limitations suit. That is the behavior of other nations. Internationally, Leer's argument is much stronger. The burgeoning use of coal by China and India itself provides a sufficient argument for giving a priority to CCS R&D. If we in the United States are capable of developing and perfecting CCS, then we can export it to other nations. If we simply allow other nations to implement coal, they will increase their carbon going into the atmosphere much faster than we could counterbalance that through any reductions we make in our carbon emissions ... and the ballgame is quickly over. This of course assumes that funding and research is not a zero-sum game. A possible next level of trumping would be the argument that clean coal is a boondoggle, an oxymoron, a distraction that steals valuable resources and commitments from implementing proven solutions such as wind energy. The next level of trumping, perhaps relevant more for a physicist such as myself than for most others, comes from Niels Bohr. Bohr embraced dilemnas, grinding the horns against each other to develop deeper understanding. In my current level of understanding, setting aside all the other issues,this is still useful in the energy and global warming domain. The nagging question, however, is "How long can we set aside the other issues?"
Now let's look at some of the slides and evaluate the degree to which we can agree with Leer's points.
The first slide shows the growth of electrical demand over the past few decades. This is real. It also fits with the commonly accepted theory about the growth of electrical demand with the growth of the GDP. Some people talk as though electrical growth caused or at least enabled economic growth. However, looking at international figures such as those displayed in the second Arch graph, it is apparent that some nations are able to be vastly more efficient in their use of electricity relative to their standard of 
living. Some of the inefficiency of a nation such as Norway may be related climate or the degree of dispersal of the population. There are hints of it in Graph 1. One can see this in the downturns in electrical demand circa 1976 and circa 1983. The first may be a response to the energy crisis, the second the delayed results in the industrial sector to efficiency efforts. With the Reagan administration began a long period of encouragement of free use of electricity and fuels. The decreases indicate that our culture can make significant decreases in electrical use if we all choose to place our priorities in that direction. While this may seem arcane to policy makers, it is obvious to people who have done value engineering or energy conservation engineering in facilities or who have thought carefully about their own electrical consumption in homes and workplaces.
Thus it is no surprise to most people that electrical demand will be increasing dramatically over the next decades. This is only partly because of rising standards of living. It is also because of industrialization. As one historian commented, where the First Industrial Revolution was based on water power, the Second Industrial Revolution was based on electrical power.
The next figure shows why much of the new electrical generation will be coal fired. Coal is cheap if one does not take consideration of full life cycle costs including emissions that create global warming, if one does not accept that the earth is an increasingly finite system. Coal is also locally available in many key countries, including the United States, Europe, China, and India.
And the resulting increases in CO2 emissions will be dramatic. The only problem is that they cannot be alloowed to happen. If they happen the game is over. Thus, if the world economic system as we know it is not to be simply shut down within a few decades, it is critical that we achieve rapid worldwide adoption of CCS. This may involve giving away the technology to many other countries. Otherwise they will not be able to afford it, and the adoption will happen too slowly for our civilization to survive.
As an addendum, I am going to insert the numbers projected by ISO so that they can be compared with the reserve margins provided by Arch Coal.
Although Leer's presentation focused on a justification for coal and carbon capture and sequestration (CCS) in our modern world, there was one key implicit point -- that it is critical to enable CCS. This might be seen purely as a self-serving argument for a coal company to make, since it would serve to extend the lifetime of coal in a world increasingly threatened by global warming. If I may draw an analogy to bridge, Leer's presentation within its own frame presents a strong argument for our society to continue to embrace coal as a fuel. It is available and cheap, and it is one of many fuel sources, none of which can supply the entire needs of our society. For some time the coal industry has been winning trick after trick within this suit. However, that argument is now being trumped by the limitations imposed by Mother Earth. One strand of thought among members of the audience was that the new trump suit would now take all the tricks, but there is yet another trump suit that may in certain situations trump the environmental limitations suit. That is the behavior of other nations. Internationally, Leer's argument is much stronger. The burgeoning use of coal by China and India itself provides a sufficient argument for giving a priority to CCS R&D. If we in the United States are capable of developing and perfecting CCS, then we can export it to other nations. If we simply allow other nations to implement coal, they will increase their carbon going into the atmosphere much faster than we could counterbalance that through any reductions we make in our carbon emissions ... and the ballgame is quickly over. This of course assumes that funding and research is not a zero-sum game. A possible next level of trumping would be the argument that clean coal is a boondoggle, an oxymoron, a distraction that steals valuable resources and commitments from implementing proven solutions such as wind energy. The next level of trumping, perhaps relevant more for a physicist such as myself than for most others, comes from Niels Bohr. Bohr embraced dilemnas, grinding the horns against each other to develop deeper understanding. In my current level of understanding, setting aside all the other issues,this is still useful in the energy and global warming domain. The nagging question, however, is "How long can we set aside the other issues?"
Now let's look at some of the slides and evaluate the degree to which we can agree with Leer's points.
The first slide shows the growth of electrical demand over the past few decades. This is real. It also fits with the commonly accepted theory about the growth of electrical demand with the growth of the GDP. Some people talk as though electrical growth caused or at least enabled economic growth. However, looking at international figures such as those displayed in the second Arch graph, it is apparent that some nations are able to be vastly more efficient in their use of electricity relative to their standard of 
living. Some of the inefficiency of a nation such as Norway may be related climate or the degree of dispersal of the population. There are hints of it in Graph 1. One can see this in the downturns in electrical demand circa 1976 and circa 1983. The first may be a response to the energy crisis, the second the delayed results in the industrial sector to efficiency efforts. With the Reagan administration began a long period of encouragement of free use of electricity and fuels. The decreases indicate that our culture can make significant decreases in electrical use if we all choose to place our priorities in that direction. While this may seem arcane to policy makers, it is obvious to people who have done value engineering or energy conservation engineering in facilities or who have thought carefully about their own electrical consumption in homes and workplaces.
Thus it is no surprise to most people that electrical demand will be increasing dramatically over the next decades. This is only partly because of rising standards of living. It is also because of industrialization. As one historian commented, where the First Industrial Revolution was based on water power, the Second Industrial Revolution was based on electrical power.
The next figure shows why much of the new electrical generation will be coal fired. Coal is cheap if one does not take consideration of full life cycle costs including emissions that create global warming, if one does not accept that the earth is an increasingly finite system. Coal is also locally available in many key countries, including the United States, Europe, China, and India.
As an addendum, I am going to insert the numbers projected by ISO so that they can be compared with the reserve margins provided by Arch Coal.
Saturday, January 17, 2009
Ford Motor Company at Harvard
Ford Motor Company at Harvard:
Progress and an Urgent Need for Green Leadership
This was actually completed on 7/14/2008. I submitted it to some newspapers for publication, but none took it on. It seems sadly prophetic now.
Copyright, John Carlton-Foss. All rights reserved 2008.
Three years ago I drove my Honda Hybrid up to a gas station and was stunned to see the $80 bill that my predecessor had rung up. My bill was $20. That was before the recent gas price escalator, which would bring that SUV’s bill to well over $100. Yesterday the man in the next bay was aggressively asking me questions about my Prius, what my total bill would be ($26 in this case), and what kind of mileage I get (50-55 mpg in summer, 45-50 mpg in winter for the Prius, and slightly better for the Honda). Honda and Toyota had scooped Detroit once again. Detroit had lost by embracing a business strategy of going to Washington to get special consideration to be other than green. I really hate to say it, but I’ve been telling people that for years. Sometimes it hurts to be right. Rather than adopting a creative portfolio approach, streamlining its organizations, and providing some leadership, Detroit has been left green only with envy. Temporarily happy stockholders during the SUV craze are profoundly not happy now.
At least that is the view I have had about Detroit for about three decades. Might this be changing? Susan Cischke, Senior Vice President at Ford Motor Company, spoke on May 5 in the Future of Energy Series at Harvard. This was much more than a public relations speech. Cischke spoke about Ford’s strategies for addressing energy issues, and about her disagreement with Congressman Markey about the new CAFÉ standards for automotive fleets. (Did she have any inkling that one of his constituents might be in the audience?)
The talk began with the dimensions of “sustainable mobility,” clearly an important topic. For this to be successful, private enterprise and private capital need to play a role, and these require profitability and business viability. Socially, the issues are Energy Security and the rapid growth of mobility in emerging markets such as China and India. “Energy security” seems to include notions ranging from the reliable availability of plentiful energy to the energy self-sufficiency of our country. To a business-as-usual company such as Ford, this would seem to mean the reliable availability of plentiful energy. With the economies of China and India now burgeoning, this is not a realistic a condition of the future. All developed nations need to concern themselves with cutting back on their own excessive carbon emissions so that there is room for China and India to expand. As an auto manufacturer, Ford needs to be concerned about the carbon footprint for producing its products, and the degree of fuel economy and carbon efflux for its cars in use.
According to Ford, there are striking differences between the auto market in Europe and that in the United States. 6% of American cars have manual transmissions versus 80% of European cars. 75% of American cars have 5 cylinders or more, while 89% of European cars have fewer than 5 cylinders. Is this purely the result of user preferences or some other set of factors? Ford seems to think it is user preference. A competent businesswoman, Cischke repeatedly referred to serving users and providing for their choices. She pushed away any suggestion of how Detroit might play a role in forming those preferences.
A key point of the talk was the view that addressing climate change issues will require a collaboration of all stakeholders: auto manufacturers, consumers, government, and fuel producers. Consumers will have to adopt the new technologies, many of which will be more expensive than the conventional technologies until they reach full production. Fuel cells burning hydrogen will have impact in 20-30 years. (Yet Shell already has established a trial set of hydrogen stations north of Washington D.C.) Hybrid powertrains will serve 10-15% of the market. (Perhaps for Ford, but not for Toyota.) Benefits of hybrids are realized [only] in urban driving. (Yet my experience with Honda and Toyota hybrids indicates that benefits extend to all situations. Modern clean diesels will be part of the core approach for the next 40 years. (Yet this does not answer the challenge of carbon in the atmosphere.) Advanced highly efficient gasoline engines will be using existing capital and refueling structures. There is a partnership between Ford and Southern California Edison for cars powered by fuel cells and plug-in electric drive trains, which are especially suited for short trips. In this way Ford passes the responsibility on to electric utilities to put minimal carbon into the atmosphere as they produce electricity.
The picture that emerges is summarized in Ford’s projections for fuel use. In 2008 we will burn slightly under 10 billion gallons of conventional corn-starch based ethanol. This use will level off at about 14 billion gallons by 2015 and be supplemented by 16 billion gallons of cellulosic ethanols, 5 billion gallons of advanced non-cellulosic ethanols and biodiesels, and 1 billion gallons of biodiesels by 2022. This is good for energy security but not so good for global warming, because burning all of these fuels still puts large quantities of carbon into the atmosphere
Ford identifies its large contribution as its “EcoBoost.” Direct injection will increase fuel economy. Turbocharging will decrease CO2 emissions. Engine downsizing will increase performance. T his last item seems a bit counterintuitive, but Ford has a graph showing a higher and more constant engine torque for a 3.5L V-6 gasoline EcoBoost engine than for a conventional 4.6L V-8 engine. To understand Fords’ thinking, it is necessary to understand the numbers, and therefore the need for Ford to get it right the first time. In Ford’s view the impacts become really favorable when the numbers of cars sold is in the millions.
Other than the avant-garde experiments (a hydrogen fleet, or an electric fleet using green electricity) these are all nice incremental, comfortable changes. They tend to provide answers to challenges of international petroleum shortages. Unfortunately they also assume business substantially as usual. Most people including Detroit seem not to have understood the urgency of the real issue yet. The most urgent issue is carbon. Humanity is already putting vastly too much carbon into the atmosphere, and the yearly injection is increasing. I agree with James Hansen who recently co-authored a paper stating that people need to reduce the atmospheric carbon from present levels now if we are to have hope of continuing in anything like the civilization that we now have. This will require something akin to a Manhattan Project along with major changes in the way people behave.
Detroit has this curious notion of making gradual transitions and of shifting responsibility on to the consumer. To a hybrid owner the transition has indeed been gradual, but transitions have a way of becoming very abrupt for those who do not adapt promptly and creatively to the need for change.. The problem with Detroit’s delays in responding is that the transition is no longer easy or low cost, and for those who wait much longer, it is going to be even more extreme.
Hydrogen is important as a fuel because there is no carbon in hydrogen if it is produced properly. In contrast with a speech at MIT by the president of Shell Oil Company a year ago, Cischke spoke only in passing about her company’s commitment to the hydrogen economy. ) However, Ford has another area in which it can contribute. She spoke of Ford’s knowhow about logistics and Information Technology. She stated that we should look for an announcement in the next few months about Ford doing something in the area of coordinating personal transportation (autos) with busses and public transportation. This is important, and will be even more important if our society is willing to start investing more in public transportation, as it must.
One of her offhand remarks was the idea that CAFÉ standards should be measured on a per person basis rather than on a per vehicle basis. This might mean that an Explorer with its extra seats would have about the same mileage as a Prius with only five seats. It also might mean that an Explorer with only one driver and no passengers would get credit for that same mileage, which of course would be wrong because it would put everything off onto the consumer. I remember how, before I realized that I could buy a hybrid, I almost went for an SUV to carry my daughter and her soccer teammates two or three times per week. I would have been driving solo for more than 200 miles per week as a result of this. I learned that a sedan actually was adequate, and ended up choosing a Prius over a Honda for our second hybrid because of the extra luggage space.
To one trained in psychology it rapidly became apparent as Cischke talked that Ford continues to be committed to its corporate values. At the same time these values are what made it into a great company, and what may lead to its continued decline. Cischke spoke of keeping the cost of cars down, of thinking in terms of millions of vehicles rather than thousands, of worrying immensely about the cost of each component in a vehicle, of a long development time necessary to provide quality, of avoiding big changes and big risks, of aiming for the middle of the market. This sounded as though Ford was a laggard adopter of innovative technology at the same time that our society now needs innovators and leaders. She spoke of Ford’s working on electric vehicles during the 80’s and 90’s in response to a Federal initiative, but not of taking the initiative itself. And so we have what may be an outstanding hypothesis for “Who Killed the Electric Car?” It was the car manufacturers, as perhaps also suggested by the movie. In Ford we see an organization that has done well with its values, continues to be committed to them, and does not understand that it will suffer because times have changed forever.
Cischke did in a way recognize this. She noted that car purchasers had for a long time gotten ambiguous signs from the economy about what kind of car they should drive. When the price of gas was fluctuating and the economy was strong, users could select whatever car they thought they wanted. However the worldwide demand for petroleum now for the first time exceeds the worldwide supply. This represents a fundamental change. With the price of gas continuing to rise, and I might add, the fundamentals of the world economy changing possibly forever, a quarter of car sales (according to the New York Times) are now smaller, fuel efficient cars. Given this, Cischke did note that people are buying more and more fuel efficient cars.
Cischke and Ford apparently suffer from one major disconnect. One way it emerges is that she said that she has talked with our Congressman, Ed Markey, about CAFÉ standards, and disagrees with him. Ford feels that their sales depend on what the customer decides to purchase, and thus argues that it is unfair to hold Ford accountable in its fleet fuel efficiency for the vehicles that its customers select. Of course, this ignores those many commercials that for decades fostered the desire for power vehicles. As one person commented to me after the talk, Ford seems to have an incredibly passive view of its role, and it simply is not believable. In contrast, I think that the Federal view on this is that the auto industry is one of the perfect places to leverage necessary change to deal with overuse of fuel and the excessive buildup of greenhouse gases in the atmosphere.
Another angle into this same issue emerged in questions from the audience. Ford makes and sells European Fords that are much more efficient. Why not sell these in America as well? Cischke responded that Ford will produce whatever people want to buy. In Europe 80% of car sales are for four cylinder engines or smaller. She stated that Ford would bring European Fords to America when there is a demand for them. Many of us would suggest that that demand is present right now. It is for Ford and its competitors to start committing resources to let Americans know that this option is available. Such a competent commitment is conspicuously absent in promoting hybrid cars. She commented that the general population knows about the Toyota hybrid and not the Ford hybrid or the Honda hybrid. This is because Toyota did an exceptional job of making its hybrid distinguishable. Other companies will have to adapt a similar view.
Thirty years ago I started having some conversations with people from Detroit who said that Detroit was actually creating the needed designs in its R&D sections. The problem was that there were many layers of bureaucracy. Each layer required time to sign off on a new product, and each layer trimmed away new features that had been developed. A year ago I had a similar discussion. My informant said simply that the new models were there in R&D. It was just that the financial people and Board emphasized profit for the stockholders and did not accept the innovative proposals that they believed would bring less profit. Combine this with Cischke’s stated view that producing a high quality production version of an innovation requires many years. The result is that the Detroit car companies are going to have to learn agility or continue their slow death spirals. Unfortunately for us, those slow death spirals may mean deep trouble in terms of global warming. Let’s hope they get with the urgency very quickly.
Progress and an Urgent Need for Green Leadership
This was actually completed on 7/14/2008. I submitted it to some newspapers for publication, but none took it on. It seems sadly prophetic now.
Copyright, John Carlton-Foss. All rights reserved 2008.
Three years ago I drove my Honda Hybrid up to a gas station and was stunned to see the $80 bill that my predecessor had rung up. My bill was $20. That was before the recent gas price escalator, which would bring that SUV’s bill to well over $100. Yesterday the man in the next bay was aggressively asking me questions about my Prius, what my total bill would be ($26 in this case), and what kind of mileage I get (50-55 mpg in summer, 45-50 mpg in winter for the Prius, and slightly better for the Honda). Honda and Toyota had scooped Detroit once again. Detroit had lost by embracing a business strategy of going to Washington to get special consideration to be other than green. I really hate to say it, but I’ve been telling people that for years. Sometimes it hurts to be right. Rather than adopting a creative portfolio approach, streamlining its organizations, and providing some leadership, Detroit has been left green only with envy. Temporarily happy stockholders during the SUV craze are profoundly not happy now.
At least that is the view I have had about Detroit for about three decades. Might this be changing? Susan Cischke, Senior Vice President at Ford Motor Company, spoke on May 5 in the Future of Energy Series at Harvard. This was much more than a public relations speech. Cischke spoke about Ford’s strategies for addressing energy issues, and about her disagreement with Congressman Markey about the new CAFÉ standards for automotive fleets. (Did she have any inkling that one of his constituents might be in the audience?)
The talk began with the dimensions of “sustainable mobility,” clearly an important topic. For this to be successful, private enterprise and private capital need to play a role, and these require profitability and business viability. Socially, the issues are Energy Security and the rapid growth of mobility in emerging markets such as China and India. “Energy security” seems to include notions ranging from the reliable availability of plentiful energy to the energy self-sufficiency of our country. To a business-as-usual company such as Ford, this would seem to mean the reliable availability of plentiful energy. With the economies of China and India now burgeoning, this is not a realistic a condition of the future. All developed nations need to concern themselves with cutting back on their own excessive carbon emissions so that there is room for China and India to expand. As an auto manufacturer, Ford needs to be concerned about the carbon footprint for producing its products, and the degree of fuel economy and carbon efflux for its cars in use.
According to Ford, there are striking differences between the auto market in Europe and that in the United States. 6% of American cars have manual transmissions versus 80% of European cars. 75% of American cars have 5 cylinders or more, while 89% of European cars have fewer than 5 cylinders. Is this purely the result of user preferences or some other set of factors? Ford seems to think it is user preference. A competent businesswoman, Cischke repeatedly referred to serving users and providing for their choices. She pushed away any suggestion of how Detroit might play a role in forming those preferences.
A key point of the talk was the view that addressing climate change issues will require a collaboration of all stakeholders: auto manufacturers, consumers, government, and fuel producers. Consumers will have to adopt the new technologies, many of which will be more expensive than the conventional technologies until they reach full production. Fuel cells burning hydrogen will have impact in 20-30 years. (Yet Shell already has established a trial set of hydrogen stations north of Washington D.C.) Hybrid powertrains will serve 10-15% of the market. (Perhaps for Ford, but not for Toyota.) Benefits of hybrids are realized [only] in urban driving. (Yet my experience with Honda and Toyota hybrids indicates that benefits extend to all situations. Modern clean diesels will be part of the core approach for the next 40 years. (Yet this does not answer the challenge of carbon in the atmosphere.) Advanced highly efficient gasoline engines will be using existing capital and refueling structures. There is a partnership between Ford and Southern California Edison for cars powered by fuel cells and plug-in electric drive trains, which are especially suited for short trips. In this way Ford passes the responsibility on to electric utilities to put minimal carbon into the atmosphere as they produce electricity.
The picture that emerges is summarized in Ford’s projections for fuel use. In 2008 we will burn slightly under 10 billion gallons of conventional corn-starch based ethanol. This use will level off at about 14 billion gallons by 2015 and be supplemented by 16 billion gallons of cellulosic ethanols, 5 billion gallons of advanced non-cellulosic ethanols and biodiesels, and 1 billion gallons of biodiesels by 2022. This is good for energy security but not so good for global warming, because burning all of these fuels still puts large quantities of carbon into the atmosphere
Ford identifies its large contribution as its “EcoBoost.” Direct injection will increase fuel economy. Turbocharging will decrease CO2 emissions. Engine downsizing will increase performance. T his last item seems a bit counterintuitive, but Ford has a graph showing a higher and more constant engine torque for a 3.5L V-6 gasoline EcoBoost engine than for a conventional 4.6L V-8 engine. To understand Fords’ thinking, it is necessary to understand the numbers, and therefore the need for Ford to get it right the first time. In Ford’s view the impacts become really favorable when the numbers of cars sold is in the millions.
Other than the avant-garde experiments (a hydrogen fleet, or an electric fleet using green electricity) these are all nice incremental, comfortable changes. They tend to provide answers to challenges of international petroleum shortages. Unfortunately they also assume business substantially as usual. Most people including Detroit seem not to have understood the urgency of the real issue yet. The most urgent issue is carbon. Humanity is already putting vastly too much carbon into the atmosphere, and the yearly injection is increasing. I agree with James Hansen who recently co-authored a paper stating that people need to reduce the atmospheric carbon from present levels now if we are to have hope of continuing in anything like the civilization that we now have. This will require something akin to a Manhattan Project along with major changes in the way people behave.
Detroit has this curious notion of making gradual transitions and of shifting responsibility on to the consumer. To a hybrid owner the transition has indeed been gradual, but transitions have a way of becoming very abrupt for those who do not adapt promptly and creatively to the need for change.. The problem with Detroit’s delays in responding is that the transition is no longer easy or low cost, and for those who wait much longer, it is going to be even more extreme.
Hydrogen is important as a fuel because there is no carbon in hydrogen if it is produced properly. In contrast with a speech at MIT by the president of Shell Oil Company a year ago, Cischke spoke only in passing about her company’s commitment to the hydrogen economy. ) However, Ford has another area in which it can contribute. She spoke of Ford’s knowhow about logistics and Information Technology. She stated that we should look for an announcement in the next few months about Ford doing something in the area of coordinating personal transportation (autos) with busses and public transportation. This is important, and will be even more important if our society is willing to start investing more in public transportation, as it must.
One of her offhand remarks was the idea that CAFÉ standards should be measured on a per person basis rather than on a per vehicle basis. This might mean that an Explorer with its extra seats would have about the same mileage as a Prius with only five seats. It also might mean that an Explorer with only one driver and no passengers would get credit for that same mileage, which of course would be wrong because it would put everything off onto the consumer. I remember how, before I realized that I could buy a hybrid, I almost went for an SUV to carry my daughter and her soccer teammates two or three times per week. I would have been driving solo for more than 200 miles per week as a result of this. I learned that a sedan actually was adequate, and ended up choosing a Prius over a Honda for our second hybrid because of the extra luggage space.
To one trained in psychology it rapidly became apparent as Cischke talked that Ford continues to be committed to its corporate values. At the same time these values are what made it into a great company, and what may lead to its continued decline. Cischke spoke of keeping the cost of cars down, of thinking in terms of millions of vehicles rather than thousands, of worrying immensely about the cost of each component in a vehicle, of a long development time necessary to provide quality, of avoiding big changes and big risks, of aiming for the middle of the market. This sounded as though Ford was a laggard adopter of innovative technology at the same time that our society now needs innovators and leaders. She spoke of Ford’s working on electric vehicles during the 80’s and 90’s in response to a Federal initiative, but not of taking the initiative itself. And so we have what may be an outstanding hypothesis for “Who Killed the Electric Car?” It was the car manufacturers, as perhaps also suggested by the movie. In Ford we see an organization that has done well with its values, continues to be committed to them, and does not understand that it will suffer because times have changed forever.
Cischke did in a way recognize this. She noted that car purchasers had for a long time gotten ambiguous signs from the economy about what kind of car they should drive. When the price of gas was fluctuating and the economy was strong, users could select whatever car they thought they wanted. However the worldwide demand for petroleum now for the first time exceeds the worldwide supply. This represents a fundamental change. With the price of gas continuing to rise, and I might add, the fundamentals of the world economy changing possibly forever, a quarter of car sales (according to the New York Times) are now smaller, fuel efficient cars. Given this, Cischke did note that people are buying more and more fuel efficient cars.
Cischke and Ford apparently suffer from one major disconnect. One way it emerges is that she said that she has talked with our Congressman, Ed Markey, about CAFÉ standards, and disagrees with him. Ford feels that their sales depend on what the customer decides to purchase, and thus argues that it is unfair to hold Ford accountable in its fleet fuel efficiency for the vehicles that its customers select. Of course, this ignores those many commercials that for decades fostered the desire for power vehicles. As one person commented to me after the talk, Ford seems to have an incredibly passive view of its role, and it simply is not believable. In contrast, I think that the Federal view on this is that the auto industry is one of the perfect places to leverage necessary change to deal with overuse of fuel and the excessive buildup of greenhouse gases in the atmosphere.
Another angle into this same issue emerged in questions from the audience. Ford makes and sells European Fords that are much more efficient. Why not sell these in America as well? Cischke responded that Ford will produce whatever people want to buy. In Europe 80% of car sales are for four cylinder engines or smaller. She stated that Ford would bring European Fords to America when there is a demand for them. Many of us would suggest that that demand is present right now. It is for Ford and its competitors to start committing resources to let Americans know that this option is available. Such a competent commitment is conspicuously absent in promoting hybrid cars. She commented that the general population knows about the Toyota hybrid and not the Ford hybrid or the Honda hybrid. This is because Toyota did an exceptional job of making its hybrid distinguishable. Other companies will have to adapt a similar view.
Thirty years ago I started having some conversations with people from Detroit who said that Detroit was actually creating the needed designs in its R&D sections. The problem was that there were many layers of bureaucracy. Each layer required time to sign off on a new product, and each layer trimmed away new features that had been developed. A year ago I had a similar discussion. My informant said simply that the new models were there in R&D. It was just that the financial people and Board emphasized profit for the stockholders and did not accept the innovative proposals that they believed would bring less profit. Combine this with Cischke’s stated view that producing a high quality production version of an innovation requires many years. The result is that the Detroit car companies are going to have to learn agility or continue their slow death spirals. Unfortunately for us, those slow death spirals may mean deep trouble in terms of global warming. Let’s hope they get with the urgency very quickly.
Thermal Inflation and Thermal Deflation
JCF@SESenergy.com
December 31, 2008
In 1980-1981 I pointed out that the ASHRAE notion of thermal comfort had undergone significant thermal inflation. I also presented a paper that indicated that there were individual differences in people’s environmental temperature requirements, and that these needs varied at least in part with personality. Since then, the Reagan Administration has become history along with the energy crisis and the Emergency Building Temperature Restrictions that they terminated. Now we find ourselves as a world society at the beginning of an energy and environmental crisis. It may be that this is caused by world demand being close to world supply. It may be that this is caused by the restrictions on burning fossil fuels if we are to avoid destructive global warming. It may be for other reasons. Whatever the cause, we know that we must take action. ASHRAE and many other entities are doing so. The issue is how much time we have to get results, and how fast our society can move.
This involves the adoption of new technologies and new ways of living and working. Adoption typically takes at least decades. Firefighters took fifty to sixty years to reach 50% adoption of self-contained breathing apparatuses (SCBA) that protect them from death by inhalation. Significant adoption of efficient energy design and technology, “clean” technology, and green technology began only about thirty years ago, and became a political issue in a way that SCBA never did. With this and James Hansen’s statement in his study that we have less than ten years to gain control of carbon entering the atmosphere, it would seem to be likely that adoption will not happen fast enough. One hopes that there is more slack in environmental systems than Hansen suggests, but even if there is, the financial, social and political investment will be staggering to achieve the requisite goals in twenty to thirty years. Given that our society is currently structured around consuming energy, it will require very close to 100% compliance. A question to think about is whether this can be achieved without enforcement efforts that would be unacceptable to participants in a democratic society.
There are two directions that this entry can now go. One is an exploration of rapidly achieving high levels of adoption. I am one of many who is working on this. Congressman Ed Markey, chair of the House Select Committee on Global Warming has stated that establishing the future system of auctioning carbon will have the same high impact as did the system for auctioning electricity. Surely this will help a great deal. But will it be enough? If not, and if our society does not foolishly deny the science, then we will be in for some hard choices. Every ton of carbon into the atmosphere will be important. We will have to consider setting back our thermostats once again.
Can we do it better this time than last time? I think so. We need to start right now to investigate what temperatures are acceptable to people. Not “comfortable,” but “acceptable” and we need to start looking now toward shifting building standards toward acceptability rather than comfort.
What is acceptability? A better term would be “acceptable discomfort.” I suggest that it is a temperature that makes occupants uncomfortable, but uncomfortable to the degree that most of them do not complain, do not shiver, do not leave the occupied space. During the winter the published thermal comfort standard would diagram the resulting acceptable discomfort zone for people wearing sweaters above the waist and pants or equivalent below the waist. The published thermal comfort standard for the summer would diagram the resulting acceptable discomfort zone for people wearing very light clothing and performing sedentary tasks.
In addition to providing immediate reductions in energy consumption, implementing a standard of acceptable discomfort happens to further another agenda, thermal deflation, the adaptation of people in our society to lower temperatures in winter, higher temperatures in summer. For thirty years my wife and I have been experimenting with adaptation to lower winter temperatures. We have chosen to live in quite cool but not overly cold environments. Whatever level of clothing we are wearing, we seek to be “acceptably uncomfortable.” At first we were challenged by living at 65-70. Sixty was painful. By now this has all changed. We have turned on the heat to reduce risk of freezing our water pipes, and to raise the temperature to 55 for my wife. I have yet to turn on the heat where I work in my Boston house. I live at 50, and find 55 to be quite warm. There were two goals in this exploration. One was to demonstrate that it is possible to live in a cellar with no heat, should that ever become necessary. The other was to demonstrate that it is possible to live productively at 55 with considerable clothing, but not so considerable as to significantly restrict motion and activity. We find that we need to fill our tank of oil just twice a year. We have called off the regular deliveries of oil, since their coming out to our house so often was a waste of time and energy for the oil company.
Setting aside my theories and experiments, it is apparent that there is slack in our human systems enabling further quick reductions in heating and cooling without reductions in productivity or acceptability. ASHRAE needs to start soon to foster research to document this area of human requirements. If more purely technical means do not achieve the required goals for insertion of carbon into the atmosphere, then we may need to know what people will require for thermal regimes without significant complaint or anger.
December 31, 2008
In 1980-1981 I pointed out that the ASHRAE notion of thermal comfort had undergone significant thermal inflation. I also presented a paper that indicated that there were individual differences in people’s environmental temperature requirements, and that these needs varied at least in part with personality. Since then, the Reagan Administration has become history along with the energy crisis and the Emergency Building Temperature Restrictions that they terminated. Now we find ourselves as a world society at the beginning of an energy and environmental crisis. It may be that this is caused by world demand being close to world supply. It may be that this is caused by the restrictions on burning fossil fuels if we are to avoid destructive global warming. It may be for other reasons. Whatever the cause, we know that we must take action. ASHRAE and many other entities are doing so. The issue is how much time we have to get results, and how fast our society can move.
This involves the adoption of new technologies and new ways of living and working. Adoption typically takes at least decades. Firefighters took fifty to sixty years to reach 50% adoption of self-contained breathing apparatuses (SCBA) that protect them from death by inhalation. Significant adoption of efficient energy design and technology, “clean” technology, and green technology began only about thirty years ago, and became a political issue in a way that SCBA never did. With this and James Hansen’s statement in his study that we have less than ten years to gain control of carbon entering the atmosphere, it would seem to be likely that adoption will not happen fast enough. One hopes that there is more slack in environmental systems than Hansen suggests, but even if there is, the financial, social and political investment will be staggering to achieve the requisite goals in twenty to thirty years. Given that our society is currently structured around consuming energy, it will require very close to 100% compliance. A question to think about is whether this can be achieved without enforcement efforts that would be unacceptable to participants in a democratic society.
There are two directions that this entry can now go. One is an exploration of rapidly achieving high levels of adoption. I am one of many who is working on this. Congressman Ed Markey, chair of the House Select Committee on Global Warming has stated that establishing the future system of auctioning carbon will have the same high impact as did the system for auctioning electricity. Surely this will help a great deal. But will it be enough? If not, and if our society does not foolishly deny the science, then we will be in for some hard choices. Every ton of carbon into the atmosphere will be important. We will have to consider setting back our thermostats once again.
Can we do it better this time than last time? I think so. We need to start right now to investigate what temperatures are acceptable to people. Not “comfortable,” but “acceptable” and we need to start looking now toward shifting building standards toward acceptability rather than comfort.
What is acceptability? A better term would be “acceptable discomfort.” I suggest that it is a temperature that makes occupants uncomfortable, but uncomfortable to the degree that most of them do not complain, do not shiver, do not leave the occupied space. During the winter the published thermal comfort standard would diagram the resulting acceptable discomfort zone for people wearing sweaters above the waist and pants or equivalent below the waist. The published thermal comfort standard for the summer would diagram the resulting acceptable discomfort zone for people wearing very light clothing and performing sedentary tasks.
In addition to providing immediate reductions in energy consumption, implementing a standard of acceptable discomfort happens to further another agenda, thermal deflation, the adaptation of people in our society to lower temperatures in winter, higher temperatures in summer. For thirty years my wife and I have been experimenting with adaptation to lower winter temperatures. We have chosen to live in quite cool but not overly cold environments. Whatever level of clothing we are wearing, we seek to be “acceptably uncomfortable.” At first we were challenged by living at 65-70. Sixty was painful. By now this has all changed. We have turned on the heat to reduce risk of freezing our water pipes, and to raise the temperature to 55 for my wife. I have yet to turn on the heat where I work in my Boston house. I live at 50, and find 55 to be quite warm. There were two goals in this exploration. One was to demonstrate that it is possible to live in a cellar with no heat, should that ever become necessary. The other was to demonstrate that it is possible to live productively at 55 with considerable clothing, but not so considerable as to significantly restrict motion and activity. We find that we need to fill our tank of oil just twice a year. We have called off the regular deliveries of oil, since their coming out to our house so often was a waste of time and energy for the oil company.
Setting aside my theories and experiments, it is apparent that there is slack in our human systems enabling further quick reductions in heating and cooling without reductions in productivity or acceptability. ASHRAE needs to start soon to foster research to document this area of human requirements. If more purely technical means do not achieve the required goals for insertion of carbon into the atmosphere, then we may need to know what people will require for thermal regimes without significant complaint or anger.
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