Council on Foreign Relations on the e...

The Council on Foreign Relations publishes a Quarterly update on the Economy. Their June 5, 2009 update is entitled "The Recession in Historical Context." If anyone was thinking our economic situation was just another recession, they should read this report. It consists of nine pages and 22 graphs comparing the average post-WWII recession, the average pre-WWII recession, the Great Depression and the current economic climate. These variables are framed by the 4 preceding years before the recessions, and continue through for the 4 years after the recessions started. Data includes the mean and the out lying range of values and is consistent throughout the graphs, rich in information and quite frightening. Have a look.

Technorati Tags: People's Economics Change Leadership

Vicente Fox on leadership.

Former Mexican President Vicente Fox was in Calgary to make a speech about the demands of the energy industry. In the process of identifying the issue, he make the perfect recommendation for the formation of this community. 

Former Mexican president Vicente Fox called for an energy "super-body" that goes beyond politics, ideologies and business interests to help create a unified global approach to the industry.

This can't involve just one person. It has to be a broad and diverse group of people that are able to take the necessary actions and make the necessary decisions. A community of people who are concerned about the future of our global economy. An economy that is dependent on a stable and secure supply of energy. Fox notes;

"(There are) too many interests, too many diverse positions, too many sources of information, What I would love to see is a leader . . . somebody should bring in some order into the conducting of the issue of energy in the future," he said in an interview before his speech. "I don't see that happening in energy."

According to Fox, assembling the talent of leaders, researchers, think-tanks and universities would help create a common purpose: "Getting energy to its optimum in the future so that energy fuels economies of the world, and so that economies of the world, being successful, fuel jobs and fuel opportunities for people."

Please join us here.

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Interesting comments on Open Source

Open source software development provides solutions to the majority of the issues the business brings. Open source is the method of software development for People, Ideas & Objects. The value is attained through different groups seeing advantages from different perspectives. From a developer point of view, I found this series of quotes from a developer on the Google Chromium blog. 

With the release of Mac Chrome to the dev-channel, I wanted to talk about open source and expectations. What was the point of releasing at this stage, you might ask? It's clearly not finished. Clearly. It's missing a large number of features, some half implemented, others not at all. Why even bother? Doesn't it just make us look bad? 

Open source projects aren't simply about a runnable binary, they're about the community of users, testers, and developers who devote their time and skills to working on a product they believe in. They go hand in hand: there's no binary without the community and there's no community without the binary. At some point in the life-cycle of a project, you have to stop thinking solely about your small band of developers and start growing the larger supporting community that will become your users, testers, localizers, documentation writers, and possibly even new coders.

In "The Cathedral and the Bazaar", Eric Raymond writes:

"When you start community-building, what you need to be able to present is a plausible promise. Your program doesn't have to work particularly well. It can be crude, buggy, incomplete, and poorly documented. What it must not fail to do is (a) run, and (b) convince potential co-developers that it can be evolved into something really neat in the foreseeable future."

Eric Raymond is also the originator of the saying "given enough eyeballs, all bugs are shallow". Writing software doesn't start off with the perfect piece of code. It develops over time and iterates through many people reviewing, contributing, testing and correcting throughout the lifetime of the code. Everyone can contribute changes, individuals who have changes test their code to make sure it doesn't "break the build" and then submits the change file to a committer to review it and commit it to the code that makes up the application. These iterations continue on through various phases of the development. The phases include alpha, beta and everything in between. I raise these points now as these quotes from the Google developer accurately reflect the development perspective. 

We're not done yet, nor is it ready for the average user. It is, however, ready for those who want to live on the bleeding edge and help lend their talents towards completing it.

Another pillar of open source, along with releasing early, is releasing often. To that end, the dev channel will automatically receive weekly updates as development continues. You will be able to see the product improving from week to week and help immediately identify when things break. Getting feedback on new features as soon as they are completed helps the developers know if they hit the mark and helps close the feedback loop with the community. The community benefits by being more involved and connected and promoting further transparency in the development process. This wouldn't be possible if we only teased users with releases at widely-spaced intervals when most decisions had been set in stone (end-users who want that can use the beta or release channels).

Please join us here.

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A Roubini warning.

Click on the title of this entry to be taken to the Bloomberg "Editor's Pick" video page for a recent video of Nouriel Roubini. Bloomberg has changed their links in which to launch the default video player on your machine. I therefore don't know if the above link will work, if not please try to source the video from this web page. Additional information has been provided from this Wall Street Journal article picked up on Project Syndicate.

Professor Roubini has become famous over the past two years for correctly calling our current economic difficulties. His concern for the over-leverage of the shadow banking system pin points the root of the current difficulties. His remedies have to some extent been adopted globally and have caused the system to appear to recover. It is clear today that the perception that this nasty recession is over and the good times are just around the next corner. 

I have to agree with Professor Roubini that the complacency about our economy is dangerous. None of the remedies being prescribed in this Bloomberg video are in place today. None of the problems that lead to these difficulties have been solved. Roubini chases the issue back to the demise of Long Term Capital Management in the 1990's. This alone shows the extent of our problems. Too much money chasing too few opportunities are causing the bubbles and busts. So much of the world has been focused on housing, the most ineffective investment spending known to man-kind. As a result of this the complacency which Roubini speaks of, we have removed these difficult topics off the agenda. Leading us to fall into the same pit we appear to have just climbed out of.

The problem for us is that there are none of the tools that we used to get out of the pit the first time. We see the effectiveness of those tools in last weeks speech by Treasury Secretary Timothy Geithner; being laughed at when he says to the Chinese their foreign currency holdings are "very safe". The credibility of the U.S. as a reserve currency is in jeopardy and the Obama Nation has no understanding of the issue, its scope or what integrity means. As I write this I am learning that the Supreme Court has refused to hear the case of the bondholders in the Chrysler bankruptcy. I'd be interested in seeing how this plays out in the market tomorrow.  

I have reviewed the works of Professor Carlota Perez on this blog before. Selecting the Perez label from this blog will aggregate the 26 posts where I apply her long term economic research to this software development project. She predicted the demise of the old economy based on her research. Stating that the long term cycle was a constant in the world economy. Where the old ceases to provide the necessary value attribution and therefore systemically fails, to be replaced by the new based on newer technologies.  

People ask me why am I so pessimistic. And I have to answer that I am overly optimistic. The bureaucracy that runs our industries is incapable and unable to provide value for society. Today there is not much disagreement. If we take the point of view that the bureaucracy may be the main form of organization in 25 years, people definitely agree with me that it's days are numbered. So how do we make the change from the bureaucracy to the Joint Operating Committee, augmented with today's information technologies? The short answer is we can't.

We see the calling for radical change as a result of the bankruptcy of the auto industry and banks already fading from the urgent crisis driven thinking of just a few months ago. Organizations are about as static of a body as one could imagine. Without the crisis situation lasting the entire time to make the transition, no change management program will work. 

Unless Schumpeter's concept of Creative Destruction is allowed to eliminate the old from the marketplace, and the new is built up brick by brick and stick by stick, no wholesale organizational change can occur. The need for the people to make the decisions that GM, Chrysler, and the Banks are finished, and they don't appear to be able to make these tough decisions. The competitive marketplace remains depressed while the new fills the void. And for oil and gas that new is People, Ideas & Objects. 

Back to the issue of my optimism. It comes about as a result of the new organizations effectiveness. Firms born of the new organizational structures will provide real value to society. The current bureaucracies have been destroying value for over ten years, in my opinion. New organizations will provide a new and prosperous economy and quality of life for everyone. If only we could get rid of these dinosaur organizations.

For those that may want to dive deeper into the research I have conducted on this point. The Preliminary Research Report introduced the Cognitive and Motivational Paradox', and the Duality of Technologies. These define the theories that change is constrained by forces that are hard to resist. On one hand the Motivational Paradox precludes the adequate resources are committed to the change when production from the current system is necessary. The Cognitive Paradox involves the way people see new situations. Placing a filter of the old ways over what is new.

In order to eliminate these paradoxes from this software development project. We need to walk a fine line. Ensuring that there is a break between the old and the new in order to maintain the appropriate focus on the tasks at hand. 

Not to go into too much detail but one of the key tools for eliminating the paradox is the vision of the system as detailed in the Draft Specification. The natural form of organization in the oil and gas industry is the JOC. In the past people had to interpret the transaction from the JOC to the bureaucracy and systems they operated within. With People, Ideas & Object the system interprets the business in the way that people understand the business, through the Joint Operating Committee. Therefore what the user will be able to do with People, Ideas & Objects is think more naturally then they do in their day to day activities today. 

The use of the economic changes and the move to a more natural way of working within the oil and gas industry are the two ways that I have chosen to fight these two well understood paradox'. Please, join us here.

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McKinsey on Risk

McKinsey Consulting are providing a 14 minute video of Peter L. Bernstein talking about risk. This is a fascinating and valuable video that I promise you will learn one or two things about risk. It's unfortunate that the video marks the passing of Mr. Bernstein, but I have put his book "Against the Gods: The Remarkable Story of Risk" in my library.



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What's holding the project back?

Well there is that budget. We currently stand with no commitments to proceed with the development of these applications. I have established December 31, 2009 as the start date for the Preliminary Specification, however, this will be delayed if the funds are not secured by September 30, 2009. Delayed for approximately one year, or the end of 2010. I see the producers, and particularly ExxonMobil, Shell, BP and Chevron having a role and responsibility to ensure this project does not get delayed any further. I will continue to impress upon them, and other producers, that they have the most to lose and the most to win in the new energy era.

 

The budget has been set for the Preliminary Specification at $30 million. This represents 30% of the study or definition phase of the project and 3% of the proposed preliminary budget of $1 billion. Companies may argue that these costs are too prohibitive. I would point them to the People, Ideas & Objects business modeland value proposition to show them how these costs are actually the least expensive IT expenses they've faced in many years. I would then ask them how efficient are their organizations today. Give them a copy of Adam Smiths "The Wealth of Nations" and highlight the division of labor and specialization theories. And lastly ask them how, in the near future, are the most efficient organizations going to spontaneously appear in a global economy?

 

Tying together the role and responsibilities with the budget needs is the plain hard facts. If we want to skip portions of the Preliminary Specification, then we can increase the overall developments time, accuracy and costs to accommodate that. The point being the most effective time and energy to get it right is at the beginning. Skimping on the costs here is the wrong direction to take. And what are we talking about, if we were to source funds from only the four companies mentioned this would be a one time cost of $7.5 million each.

 

And for that there is no guarantee. If we subsequently choose to travel further down the development road. The value for these producers will exist in the applications ability to meet their unique organizations needs and asset requirements. What I am saying is, the onus falls on the producer firms that commit to this project; to not limit their contribution just to capital. The effort and understanding of their operations must be represented and operational within the finished software. I see this responsibility being the subscribing producers as much as it is the user groups. Success will be a matter of the collective will of many people. Please join us here.

 

Technorati Tags: People's Community Development Economics Funding Value-Proposition
 

Exxon's Annual Meeting.

On MasterResource, "a free market energy blog", the author Robert Bradley has a summary of the ExxonMobil Annual Meeting. First of all it is satisfying to see an energy company that doesn't indulge in the politics of climate change or the folly of alternative forms of energy. Those within the industry that are in the know, know that the exploration and development business has entered a more scientific level of complexity.

The metrics of success and failure in the oil and gas industry have therefore changed. Metrics that will determine the winners and losers on a far different basis then the metrics that brought the industry leaders to their lofty heights. ExxonMobil's, BP's, Shell's and Chevrons. The Draft Specification is based on the understanding that I gained from over 30 years of oil and gas experience, the research into innovation and organizations that has been published on this blog, and a passion for Information Technologies.

If we approach the energy problems that we have today with yesterdays organizations and approach. Then it is reasonable that we will fail in this "new" business. If however, we understand that software defines and supports the organizations, then we need to build a software application that will enable the oil and gas producer to achieve the speed and innovativeness necessary to continue to succeed in this business.

I find ExxonMobil's CEO Rex Tillerson's comments in the Annual General Meeting refreshing. Comments that reflect his concern, focus and understanding of the energy business is consistent with the Draft Specification.

Comments such as;

Petroleum as a primary energy source is the future, not only the recent past. (Comment: renewable energies once had a 100% market share, corresponding to mankind’s energy poverty era.)

Although renewables and alternatives are growing, their overall piece of the energy mix will remain small until they reach the massive scale at which fossil fuels are used. And Exxon won’t invest beyond research until renewables are profitable without subsidies, Tillerson said.

The situation before all of us is very difficult. The solution starts with action, action by individuals who join this user group, and producers such as those mentioned in this article, working together to solve these problems. On a related note I am reminded of Ray Kurzweil's comments of how we solve large problems through exponential developments. Please join us here.

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Google's Wave

With Google Wave I think we have a clear direction where the future of Information Technology is headed. There is an hour and twenty minute video of the Google Developers Conference announcement of their Wave product. Although it is early, I do not see to many hurdles to having the product shipping. Clearly the technology is not the key attribute of the value of the Wave product, its the implementation.

Lets quickly dispatch the techno speak with this one paragraph. Wave is open source, Java and uses the Google Web Toolkit. (Renders browser based code from Java.) All within the technology stack used by People, Ideas & Objects. The one technology that is not available is the W3C's HTML 5. I do not foresee HTML 5 having too much difficulty in being implemented quickly. HTML 5 provides some persistent data storage which is provided by the able Google Gears in the product demonstration.

So why is Google Wave an important technology for users and producers of People, Ideas & Objects. I will be augmenting the Draft Specification to include the video and this text. If we go back through this blog and the ideas that were used to build the Draft Specification. We focus on three key areas and some minor additional points. The three key areas in descending order of relevance are the Accounting Voucher Module, Military Command & Control Metaphor and Security & Access Control Module.

Recall in the Accounting Voucher we are capturing the changes in the business on a month to month basis. As "things" happen they are captured and recorded in the Accounting Voucher for future use. If this isn't making any sense then please review the Accounting Voucher part of the Draft Specification to better understand what it is that I am saying. The accounting changes that are captured in the Voucher are the discussions, documents and decisions that are made. The Accounting Voucher is capturing and recording the financial impact of these changes. It is the Google Wave infrastructure that we inherit, by using its open source code, and enhance it to incorporate the ability to capture these financial changes.

As the video reflects, we acquire these in a unique interface provided by Google. Representatives of the various producers on the Joint Operating Committee (JOC) interact on the topics of interest in the JOC. These are in documents, asynchronous communication, synchronous communications and in all the media available. The mode of these interactions are person to person, person to process, process to person and process to process as I noted in the Preliminary Research Report. A rich environment that provides the media, mode and method of communications that are necessary to support the innovative oil and gas producer.

The Military Command & Control Metaphor is used throughout the Draft Specification as the means to provide the dynamic resources provided by the producer members of the JOC. Much as the pooling of military resources is done by the NATO forces, the People, Ideas & Objects application is able to dynamically assign the corporate governance, authority, role and responsibility necessary to efficiently and innovatively manage the Joint Account. This Metaphor is used throughout the application, but most importantly one that controls the interaction of the communication and documentation contained within the Google Wave open sourced code.

Lastly I want to reiterate the importance of the Security & Access Control Modules use of Sun Microsystems Federated Identity software as the means to ensure these corporate governance needs are maintained in such a dynamic manner. I would encourage readers to spend some time in these elements of the People, Ideas & Objects application. It is an area that I think the innovation could and will prosper and is ripe for the users to exploit for their advantage; and please join us here.

Technorati Tags: People's Military-Command Development Specification

Changes at Shell.

A number of articles are appearing about the announced changes at Shell. A new CEO Peter Voser takes over July 1, 2009 and has announced a major overhaul of the firms operations. Fox notes:

Oil giant Royal Dutch Shell on Wednesday announced a series of changes to senior management roles and responsibilities, which it said were aimed at creating a sharper focus on operating performance and technology.

I interpret these changes as an admission that the engineering and earth sciences necessary for each barrel of oil produced are increasing. The Calgary Herald reported that Voser said:

"Organisationally, we are too complex, and our culture is still too consensus-oriented. Our costs are simply too high," Voser said in an email to staff, excerpts of which were seen by Reuters.

Details of the changes include the consolidation of divisions into operating units around geographical locations. North America being one in which I would assume Houston will take the lead role in. It is also reported that many lay offs will occur throughout the company. 

The Calgary Herald notes many of the differences between Shell, Exxon and BP's announced reorganizations. These are all ongoing and reflect different characteristics and management styles. 

Exxon is renowned within the industry for its strict management practices and insisting employees do not deviate from standard operating procedures. BP, on the other hand, had a risk-taking culture that allowed considerable freedom to managers of units or fields, and Shell had a culture of making decisions by consensus.

What does People, Ideas & Objects offer firms such as Shell, Exxon and BP.

• The Preliminary Research Report provides:
  
• A focus on the expanding earth science and engineering demands of each barrel of oil.
• A focus on innovation and its iterative impact on science. 
• How a firm can adopt an innovative footing.
• A greater focus on the business of the business through the five frameworks of the Joint Operating Committee.
• Providing the innovative footing and science based strategy.
• The legal, financial, operational decision making, communication and cultural frameworks of the industry. 
• A global dedicated oil and gas software development capability.
  
• Unconstrained by the paradox of code and customers. 
• Draft Specification.
• Eleven modules based on the research contained in the Preliminary and Final Research Reports.
• Firm focused application modules.
• Compliance & Governance 
• Research & Capabilities 
• Analytics & Statistics 
• Marketplace focused application modules.
• Petroleum Lease Marketplace 
• Resource Marketplace 
• Financial Marketplace 
• Joint Operating Committee application modules.
• Knowledge & Learning 
• Performance Evaluation 
• Accounting application modules.
• Accounting Voucher 
• Partnership Accounting 
• Generic
• Security & Access Control 

It's interesting the three methods that are used by Exxon (Strict Management Practices), Shell (Consensus) and BP (Risk Oriented.) Neither of these management practices or strategies are precluded in the People, Ideas & Objects. It is very clear that a unique strategic identity is enabled in each producer through this system. This also does not preclude a strong governance structure. With the reduction of the hierarchy an alternate form is required and one has been developed. That is the Military Command & Control Metaphor used within the Joint Operating Committee affording the pooling of resources and reducing the redundant capabilities built within each silo'd oil and gas firm. 

Lastly I would point to how this project is a commercially viable one by pointing out the business model of People, Ideas & Objects and the Community of Independent Service Providers. And the Technical Vision  of where the Information Technologies promise the greatest value and how this product is supported technically. 

These firms are a part of the global oil and gas industry and therefore part of the focus of this development. I encourage you to forward this post to the people you know at Shell, Exxon or BP and have them read for themselves what is possible. I would also encourage you to get involved in moving this vision forward by joining in this process. 

Technorati Tags: People's Capabilities Changes Engineering Geology Governance Specification

For the last time.

This royalty "debate" in Alberta has to stop. We consistently are told by the Calgary Herald, who for some reason are beholden to the venture capital groups, that the Provinces royalty regime is the reason for the economic difficulties. Are we to assume then, that the Alberta Governments royalty regime is the source of the global meltdown. 

The issue is there's money on the table. Billions and it belongs to the resource owners, the people of Alberta. It goes back to the battle of Alberta in 1972. Our Premier Peter Loughheed was not going to allow the Federal government, represented by Canada's version of Obama, Pierre Trudeau to abscond with the resources that belonged to the people of Alberta. Trudeau mania, as the Obama nation will do for the U.S., destroyed Canada. Loughheed was successful and the bitter Trudeau in retaliation changed the tax laws to disallow Alberta royalty payments as deductions from income taxes. Never before has a tax been implemented is such an unfair and unreasonable basis. 

Fast forward to today, our new Prime Minister Stephen Harper from Calgary quietly reversed this injustice two years ago. The tax deduct-ability of Alberta Royalties was brought back in line with all other industries and jurisdictions. Therefore creating a huge after tax benefit for the producers. What is not remembered is that the Alberta government had to reduce their royalty take in order to remain competitive in the industry. Not reducing the royalty take would have left Alberta a ghost town.

Enter the 1980's and Trudeau is up to no good again. This time implementing the national energy program. This much hated program disallowed producers from selling their production at world prices, and received a regulated price dictated by Ottawa. A wellhead tax of 12% and the discriminatory ownership rules that disallowed anyone but Canadians owning oil and gas producers. Lougheed countered this, again, with the Alberta Government granting up to 35% of capital costs to producers that remained active. This also stopped the province from housing only ghost towns. 

In the 1990's we found ourselves in debt and had a budget deficit of mammoth proportions. Our new Premier Ralph Klein implemented an austerity program that enabled us to live with in our means and indeed reduce our debt. Note at no time were the producers subjected to any changes in the royalty framework or taxes in order to balance the budget. This was done on the back of taxpayers who went without education and health benefits. Civil servants by the truck load were laid-off and eventually the government finances recovered. 

In this past decade the province has prospered due to their fiscal house being in order. We became debt free and were the benefactors of an appropriate fiscal discipline and increasing energy prices. What throughout this period back to the 1970's provided was a stable royalty regime for the industry that existed since 1972. My math may fail me but that is 37 years ago. Has the industry changed? Does the Alberta government have to keep its hands off the windfall the producers are realizing from the federal tax changes? I wouldn't think so either. 

What the Calgary Herald seems to be unable to comprehend is the royalties are the fair value consideration the producer pays to earn title to the product. It is not a tax. Royalties belong to the people of Alberta and the producer must purchase those commodities from the people of Alberta. The Alberta Government acts as an intermediary to administer and distribute this value back to the rightful owners. I have repeatedly made comments to the Calgary Herald over the past year about these points and have never seen any of these facts appear in the paper. I find it ironic and typical of the Herald is not permitting any comments on this point in today's' on-line version. 

The Canadian Association of Petroleum Producers have been running this campaign for the industry. Recent defections of their members are showing that cracks are appearing in this facade. Husky and Paramount have both ceased to be members of the association. It is not clear why they declined their membership, but the "rumor" is it's over the handling of this royalty situation. Paramount' founder and leader is on record as saying the royalty changes are positive. Therefore, I think the Calgary Herald, who are soon to meet the great printing press in the sky, will have the Calgary people cheering their demise for their representing only CAPP's point of view to the real owners of the oil and gas resources. 

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