Perez Technology Revolutions Part I

In our recent review of Professor Carlota Perez' work. We determined that now is the point in time when the Information & Communication Technology Revolution (ICTR) has begun. Where the last 40 years in communication and computer technology were the installation period. A time when things are developed and installed but still have not all of the associated technologies operating in the marketplace. This last point being reflected clearly in the development of the Internet in the 1990's. Without the Internet their would be no ICTR, and until computers could be developed to the level they are today, the benefits would not, and could not, commence.

Professor Perez has also documented what changes will occur as a result of the ICTR, based on her review of the former industrial revolutions and similar economic phenomenon. These changes include significant upheaval in the markets of existing firms. This upheaval due to the greater efficiencies of those firms built on the new technologies. Professor Perez shows these market upheavals are the 2008 financial crisis, and the 2000 dot com meltdown.

Where we now stand is at what Professor Perez calls the "Deployment" period. Where the value generated by these new technologies lifts all boats. Or as Professor Perez calls it a "Sustainable Global Knowledge Society Boom." We now begin our review of Professor Perez' paper "Technological revolutions and techno-economic paradigms". Her abstract reads as follows;

This paper locates the notion of technological revolutions in the new-Schumpterian effort to understand innovation and to identify the regularities, continuities and discontinuities in the process of innovation. It looks at the micro- and meso- foundations of the patterns observed in the evolution of technical change and at the interrelations with the context that shape the rhythm and direction of innovation. On this basis it defines technological revolutions, examines their structure and the role that they play in rejuvenating the whole economy through the application of the accompanying techno-economic paradigm. This over-arching meta-paradigm or shared best practice 'common-sense' is in turn defined and analysed in its components and its impact, including its influence on institutional and social change.

This is exactly what we need. A road map of sorts of how innovation will be implemented, and how the technologies that are employed to enable this "common-sense" revolution. We know that the future is going to be prosperous, but how, and what will the ICTR look like after it has run its course. That is to say what will the next few years look like.

1. Introduction

People, Ideas & Objects is a reflection that we are Object based developers. "Objects" replacing Professor Paul Romer's "New Growth Theory" of People, Ideas & Things. Using the Joint Operating Committee is the cultural, operational decision making, financial, legal and communication frameworks of the oil and gas industry. The truer that we can sail towards these frameworks, the greater our productivity, as measured in global oil and gas production. Professor Perez begins her analysis of the origins of economic growth.

Schumpeter is among the few modern economists to put technical change and entrepreneurship at the root of economic growth (Schumpeter, 1911, 1939). Yet, strangely enough, he saw technology as exogenous and - together with institutions and social organizations -- 'outside the domain of economic theory' (Schumpeter, 1911, p. 11). His focus was the entrepreneur and his goal was to explain the role of innovation in economic growth and on the cyclicality of the system.

and

This paper will concentrate on technological revolutions and techno-economic paradigms: their definition, the causal mechanisms that bring them about, their impact on the economy and institutions and their relevance for economic analysis. Yet, since these macro phenomena are deeply rooted in the micro-foundations of technical change, the following section will refer to some of the basic theoretical advances made at the micro and meso levels. p. 186

2. Innovation as the dynamic space for the study of technical change

In the May 2004 Preliminary Research Report the key or primary research into innovation was through Professor Giovanni Dosi's "Sources, Procedures and Micro-Economic Effects of Innovation" 1988. There I suggested an application of these "trajectories" as

An excellent example of this would be the discovery of the north-south orientation of horizontal under-balanced drilling in the Jean Marie formation of British Columbia, where knowledge and collaboration lead to a fundamental low cost solution to a technical problem. This simple change, reflecting the effect of the thrust of the Rocky Mountains, has lead to significant findings and deliverability of gas.

Professor Perez notes;

Indeed, the space of the technologically possible is much greater than that of the economically profitable and socially acceptable. p. 186

And points directly to Professor Dosi's earlier works.

The meaningful space in which technical change needs to be studied, therefore, is that of innovation, at the convergence of technology, the economy and the socio-institutional context. That space is essentially dynamic and, in it, the basic concept is that of a trajectory or paradigm (Dosi, 1982), which represents the rhythm and the direction of change in a given technology. p. 186

We see Professor Perez' point about technical trajectories when we understand the north - south orientation of a horizontal leg of a well. Has grown to the point where the multiple fracing of horizontal wells, based on this earlier knowledge, has opened massive deliverability in the shale gas formations.

3. The regularities of technical change: innovation trajectories

It is critical to point out here the development of the multi-frac laterals in oil and gas production. The situation in the May 2004 Preliminary Research Report regarding north-south orientation became common knowledge in the industry in 1997. Why did it take almost a full decade for the common-sense knowledge to develop into the shale gas bonanza that we find ourselves in today?

Changes generally occur slowly at first, while producers, designers, distributors and consumers engage in feedback learning processes; rapidly and intensively once a dominant design (Arthur, 1988) has become established in the market; and slowly once again when maturity is reached and Wolf ’s (1912) law of diminishing returns to investment in innovation sets in. Besides rhythm, a trajectory also involves directionality within a possibility space. That is what Dosi (1982) emphasised when, with the Kuhnian parallel in mind (Kuhn, 1962), he introduced the term technical paradigm to represent the tacit agreement of the agents involved as to what is a valid search direction and what would be considered an improvement or a superior version of a product, service or technology. A paradigm is thus a collectively shared logic at the convergence of technological potential, relative costs, market acceptance, functional coherence and other factors. pp. 186 - 187

The Draft Specification employs this thinking in the Resource Marketplace Module. To accelerate a trajectory necessitates the noted process highlighted in the previous quote. The Resource Marketplace Module suggest that this trajectory is accelerated when the collective understanding of all producers, as reflected in their long term capital budgets, is aggregated and shared in a common interface for other producers and service industry representatives to see clearly what is on the collective producers mind of what is possible in each geographical region.

A similar interface is operational in the marketplace today. It is the Google Health application that provides high quality security to its users. It also is able to take the information that is made available, in aggregate, to search for possible trends and other information that is generally not available in any other form. Welcome to the 21st century. 

The notions of trajectory or paradigm highlight the importance of incremental innovations in the growth path following each radical innovation. p. 187

4. New technology systems and their interactions

Emphasis on the Community of Independent Service Providers and the User communities is important, not just because it is fashionable. There is a defined and tangible benefit to organizing the solutions to these problems. Individuals such as Einstein, Ford and Edison operated in a time when an individual could single handily make a difference. Today collaboration amoung highly motivated individuals are what are necessary to take us to the next level of what is possible. These actions take place in Marketplaces.

Innovation is usually a collective process that increasingly involves other agents of change: suppliers, distributors and many others, including consumers. The techno-economic and social interactions between producers and users weave complex dynamic networks that are what Schumpeter referred to as clusters. Furthermore, major innovations tend to be inductors of further innovations; they demand complementary ones upstream and downstream and facilitate similar ones, including competing alternatives. p. 188

These clusters of innovation are not represented in the bureaucracy. The ten years needed to go from single to multiple fracs of a horizontal lateral is a long time. We need a far more capable and dynamic means of organizing our approach to the heightened demands for energy. 

The interrelatedness of technologies and of the knowledge and experience bases that underlie their development, together with the infrastructures and service networks that complement them and the multiple learning processes that accompany them, provide externalities for all participants and competitive advantages for the economy in which they are embedded. p. 189

Recall what Ludwig von Mises said about the Industrial Revolution. Quotation from Ralph Raico.

Back in the early 1700's there were slums, people were poor, people died, every possible plague. Mises says you cannot understand the industrial revolution without understanding the western world was undergoing an un-precedented population explosion. For example, England in 1750 had a population of about 6 million; by 1850 the population was 24 million. The question was how would these new tens and tens of millions of people survive? Mises said the industrial revolution was the answer to the population explosion. That's how they survived, by society becoming immensely more productive.

Today society needs the oil and gas industry to be "immensely more productive", there is a lot at stake. If your an enlightened producer, an oil and gas investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

More of Professor Perez later this week.

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Account Manager Position

The Account Manager Position is a senior position within the People, Ideas & Objects organization. Senior from the point of view of their understanding of the oil and gas industry, senior from the point of view of how well they understand the producer firm(s) they represent. Note that they are representing the producer firm and not a specific Joint Operating Committee. Ideally these individuals will be seconded to People, Ideas & Objects from the producer that they originated from.

Account Manager's are the conduit between the members of the Community of Independent Service Providers (CISP) and the users that are resident and employed at the producer firm or within a user community. If members of the CISP need clarification on a finer point of the producer's needs, they will contact the Account Manager for that producer who will secure the users necessary to clarify the point. Alternatively, a user who has an idea on how better to do their job can contact the Account Manager who will provide the CISP members and People, Ideas & Objects developers to be at the disposal of those users.

Users can and will be members of the producer firms, and not necessarily part of People, Ideas & Objects. User groups may be comprised of 100% of the producer firms staff. CISP resources are members of People, Ideas & Objects from the point of view that they have custody of the applications current and future software applications design. Starting with the Preliminary Specification and continuing on with tuning and delivering innovative People, Ideas & Objects software products to the industry.

Members of the CISP will source payment for their design and analysis work from People, Ideas & Objects directly. They will also bill the producer firms for the work they conduct at the producer firms on behalf of People, Ideas & Objects. Roles such as training, implementing and assisting the producer staff with the People, Ideas & Objects applications. Users will be compensated for their time in any and all activities by either the producer firms, as a member of the CISP or as a consultant outside of the CISP. People, Ideas & Objects will provide tools in which users can affiliate themselves and organize themselves in generic membership forums.

If your an enlightened producer, an oil and gas investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Hardware Policies & Procedures

Let's talk about that 800 pound Gorilla that's sitting in the room. That is the desire of the management of oil and gas producers to control their data, their software code and the hardware their applications run on. With this post, management will see how it is they have those attributes under their control in a manner that gets this animal out of the room.

Hardware and software are two areas that need to be addressed in providing the People, Ideas & Objects application to its users. The software is as has been detailed elsewhere, open source providing the producer firm to see what their applications are doing. This opportunity may best be managed in the hands of a consortium of professional accounting firms that review and verify the code on behalf of their clients, the producers. The hardware is proposed to be handled in the following manner. This proposal is valid until April 30, 2010 and is dependent on producer firms, shareholders and investors funding the 2010 software development budget.

By way of granting an exclusive license to run the binary of People, Ideas & Objects, People, Ideas & Objects earn an interest in a subsidiary corporation. This firms sole purpose will be to run that binary in manner that is consistent with the innovative oil and gas producers needs. The only caveats that I place on this firm is the hardware is sourced from Oracle and is "cloud" based in its delivery. We do not need to have a disjointed hardware service that is scattered around the globe. Centers could be located in Calgary, Houston, Dallas, Aberdeen, Riyadh, Rio de jeneiro, Malaysia or Mexico City. But only one location within each logical region. In Wednesday's Oracle presentation Larry Ellison asked "How could you be against Cloud Computing, that's all there is."

An equal portion of the firm will be granted to Oracle in providing them the ways and means to profit from the firms activities. Oracle will need to have Data Base Administrators (DBA's) servicing the user and producers. The fact that these facilities will be all Oracle products might be an opportunity for Oracle to make a donation of hardware, software or services in recognition of that.

The industry will then provide the start-up funds for this hardware and service. These are expected to run up to $2 million and the industry earns their equal interest. Therefore Oracle, the industry and People, Ideas & Objects will each own one third of the firm and each will have some skin in the game as they say. But this will still not satisfy anyone with the removal of the monkey.

With the granting of the license to run the binary, Paul Cox or my designate, will sit as the Chairman and have two votes on the board of directors. Oracle and industry will each have one designate. The president of this hardware firm will be the innovative oil and gas producers designate, as will all of the staff of the facilities. The Chairman will have limited access to the facilities in all ways and at all times. In addition to running the binary of the application, these facililties will host the development environment for People, Ideas & Objects.

Invoicing of the costs associated with running the facilities will be sent to People, Ideas & Objects. These funds will be sourced from the annual assessments paid by the innovative oil and gas producers.

The Hardware Policies & Procedures satisfy the needs of industry with respect to their data, their processing and the costs associated with running these facilities. Absolute administrative control is provided to the producers. Oracle will provide their hardware, software and services in such a manner as the administration deems necessary and in compliance with the license granted.

This structure is proposed to expire on April 30, 2010, and is contingent on our 2010 budget fully secured. The oil and gas producers have a fully motivated team operating this critical resource. If your an enlightened producer, an oil and gas investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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It's cold down here.

In other words, hell has frozen over and were moving to Oracle. If you stare at a brick wall long enough...

As a customer of Sun Microsystem products, and as a result of Oracle's acquisition of Sun, we become an enthusiastic Oracle Customer. The five hour presentation provided by Oracle on Wednesday was breath taking. People, Ideas & Objects will have the compelling vision of the Draft Specification, the rabid users fueled by that vision; organized in their own communities, and now the ability to execute our plans on Oracle hardware, software and services.

The relationship that People, Ideas & Objects will have with Oracle is as a customer. People, Ideas & Objects represents the oil and gas producers technology needs, first and foremost. That may cause some difficulties with the Oracle people, however, I am extremely comfortable with it. We are the ones that are responsible for Quality & Velocity and as Oracle knows, money talks. The President of Oracle made the following comments today.

As always, our primary goal is 100% customer satisfaction. We are dedicated to delivering without interruption the quality of support and service that you have come to expect from Oracle and Sun, and more. Oracle plans to enhance Sun customer support by improving support access, offering better interoperability support between Oracle and Sun products and delivering services in more local languages. Support procedures for your existing Sun and Oracle products are unchanged, so for now you should continue to use the same channels you've been using. Customers can continue to purchase products from Sun in the same way they did prior to the acquisition. We will communicate any changes to this through regular channels.

Tomorrow will see the publication of our Hardware Policies & Procedures. This will detail how the cloud component of People, Ideas & Objects is constructed, owned and operated.

If your an enlightened producer, an oil and gas investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Energy companies earnings season.

Energy firm earnings will be coming out in the next few weeks. With today's announcement of 5.7% 4th Quarter GDP growth we should expect to see some performance in the energy stocks. One thing is for certain, is the energy industry continues to change and surprise in terms of where it's moving. As soon as you think things have stabilized, they change again and that is the situation we are seeing. High prices have faded, and are replaced with modestly handsome commodity prices. Write downs of reserves have been met with higher production volumes and increased reserves over production.

A trend toward higher costs continues. Field operations are curtailed with only half as many wells being drilled over the prior year. Service companies are the first to feel the effects of any downturn, and are affected far greater then the producers themselves. Halliburton noted this fact in the Houston Chronicle.

Despite the improvement since the summer, Halliburton's fourth-quarter results suffered compared to a year ago, as drilling slowed amid weak commodity prices and sluggish demand, problems plaguing the entire sector.

Hess Corporation realized many pleasant surprises as their profit, production and reserves were higher then the analysts expectations. This may be the area where the "good" news begins to fade from the next few weeks earnings. The large independents and super majors are able to control more of their activity levels outside the market gyrations, and as a result are able to maintain steady earnings. The smaller independents and small producers will no doubt seek to disappoint.

NEW YORK -- Hess Corp. said Wednesday it swung to fourth-quarter net income of $358 million, or $1.10 a share, from a loss of $74 million, or 23 cents a share in the year-ago period. The New York firm's oil and gas production rose 9.5% to 415,000 barrels of oil equivalent a day. Total revenue rose to $8.56 billion from $7.25 billion. Analysts expected earnings of 83 cents a share and revenue of $7.47 billion, according to a survey by FactSet Research.

One strong trend is the move to shale gas formations. Many are beginning to state that this is a significant and durable trend for the North American marketplace. Gas prices appear to concur.

BP chief: Unconventional gas ‘game changer' in U.S.

Noting that the effects of the additional unconventional gas reserves are having on future Liquefied Natural Gas production from the Middle East. This production is now though to be rerouted to Europe. Putting pressure on the Russian prices which are being depressed by the potential new supply coming to Europe. Though the sluggish demand due to the financial crisis can still be felt, there is optimism in the marketplace.

The knowledge and thinking that the need for new organizations and ways of conducting business is becoming common in the industry. 2010 looks to be the year that People, Ideas & Objects begins the process of developing the Draft Specification and the communities associated with these development begin to form.

If your an enlightened producer, an oil and gas investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Royalty Policies & Procedures

In 1992 the Alberta Legislature enacted "Royalty Simplification". Conceived as a benefit for industry and the administration to reduce the burden in calculating and filing gas royalties. This initiative was to be achievable through a heavy reliance on Information Technology. A significant and ambitious program that promised greater ease for both government and industry. It's now almost eighteen years since that legislation was passed, how have things gone? The only conclusion that you could come to is; why would industry ever want to develop an accurate system in determining and remitting royalties? Is accuracy of royalty payments within their business interests?

Apparently not. To date nothing tangible has been built by any producer or software vendor and no plans currently exist to build a system. Within People, Ideas & Objects there is no calculation of royalties included in the Draft Specification. There is a place in the Joint Account to record the royalties that are due, but it will have no basis in fact or necessarily be in compliance with the regulations supporting those royalty assessments. It's an all-or-nothing proposition in terms of making the correct calculations. Therefore in today's marketplace the burden has fallen to the Alberta Government to assess invoices to the producers based on what they believe to be volumetric variances.

In 2009 Alberta's Auditor General reported the amount of royalty deficiencies may be upward of a quarter billion dollars. To be honest he really didn't know! What is known is that the industry will not spend a penny on royalty compliance software. Therefore why would People, Ideas & Objects expend producers money to meet the Alberta or any other jurisdictions royalty calculation? Who's responsibility is to ensure compliance and accuracy? Although it was conceived as a self assessing system, the governments ability to assess invoices for deemed deficiencies alleviates the producers of the responsibility to accurately calculate the royalty obligation.

In 1997 the Alberta government held a meeting with the software developers and asked why there was no usable software in the market. It was suggested that to build royalty based compliant system it would cost $40 million per software vendor. Where would this money come from? No investor or producer is willing to pay that cost. And therefore that is where we stand.

Unless Alberta, Saskatchewan, British Columbia, Mexico, Texas, Louisiana, Libya, Saudi Arabia, Petronas and others want to fund the systems development costs of royalty compliance, People, Ideas & Objects would not use any producer funds to build a system that is the responsibility of the royalty holder. In Alberta that is the provincial government and they have over $10 billion in annual royalty income, it is therefore their responsibility to ensure that they are collecting the right amount from the producers.

Whether the Alberta government would fund the costs of developing royalty compliance in People, Ideas & Objects is unknown. If the Auditor General has a perceived shortfall, that is the government's problem. How much an individual producer is overpaying could also be unnecessarily high. Royalties like taxes, have opportunities and issues with how the royalties are calculated. Those producers that are able to approach their royalty strategy aggressively have a substantial benefit in lower royalties and as a result, higher margins then other producers.

People, Ideas & Objects would like to build a fully compliant and accurate royalty system for all the jurisdictions in the world. Software, as we see in this discussion, is a small portion of the entire picture. The Community of Independent Service Providers is where the tacit knowledge exists in calculating accurate and fair royalty obligations. They are the ones that can employ the aggressive strategies on behalf of their producer clients, using the People, Ideas & Objects prospective Royalty Modules for the calculations. Software that is funded by the Alberta Government and verified to be accurate by Alberta's Auditor General.

If your an enlightened producer, an oil and gas investor or shareholder, who would be interested in funding these software developments, please follow our Funding Policies & Procedures. If your a government that collects royalties for oil and gas, and are concerned about the accuracy of your royalty income, please email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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One plus One Equals Five

That's not just bad math, that's the new Oracle / Sun merger. Wow. I have always appreciated both companies for their technical abilities. They have always worked together to bring these excellent technologies of theirs, however, there was always a bit of a break or a seam between the two companies where things would fall through the cracks. Now there is one provider for all the technologies and the gaps are filled. But that's not all. When you add the two, the sum of the parts is clearly much larger then the two companies parts.

I am revisiting our strategy regarding the technologies that are being offered by Oracle / Sun. I have been critical and maybe a bit unkind towards Oracle and maybe now we need to re-evaluate that. What is different to me is that we don't fit into the Oracle developer world. I see People, Ideas & Objects as a customer of Oracle / Sun. When I see things from that renewed perspective, I see this solution growing substantially more real in terms of its possibilities.

Making this big of a shift in terms of the Draft Specification, the user community and the Community of Independent Service Providers are not affected. Producers win handsomely in a revised People, Ideas & Objects. I'll be making this decision in a short period of time. January 31, 2010 I'll note the changes, if any, in a post.

Larry Ellison made the comment in his presentation today. "How can you be against cloud computing, that's all there is". Sun Microsystems wrote a White Paper on Cloud Computing in June 2009. Access to the document may require registration. Unlike most papers on Cloud Computing, this paper identifies the key concepts and concerns of business users. I learned a lot about many of the changes in architecture that are necessary, and I see clearly how an application such as People, Ideas & Objects can run in the cloud.

The two terms best used to define People, Ideas & Objects overall concerns is "Quality & Velocity". Two buzzwords that are well worn but important to these communities. Quality of course is the hard fought-for demand for perfection. Doing things in a half-baked manner is unacceptable to me and these user communities, and although I am unable to assert the necessary requirements in a project with this scope. The architecture and Complex Adaptive Systems, where users are in control of the product quality, are how the People, Ideas & Objects application modules will achieve its quality.

Velocity is a term that is being used in the technology and Complex Adaptive Systems communities. It refers to the speed at which things are happening. The bureaucracy was very effective in its efficiency, due to its inherent inefficiency. That is to say that the bureaucracy is inefficiently efficient. Today, and in the future, requires that velocity be accelerated to meet the demands of the market for energy. Velocity is the speed of change and development, and can not be planned or organized in a traditional fashion. It has to happen and evolve from the community naturally, it can't be forced or involve management changes.

Quality & Velocity are why the communities, and particularly the Community of Independent Service Providers are so important to the success of People, Ideas & Objects and the energy industry. As much as I want to be part of that community, I know that any further meddling from me is not just counter-productive but destructive. If I could write the Preliminary Specification it would take me 5,000 years. I chose the alternative and sane choice of not being involved at all. My job, as I see it today, is to source the financial resources to support the communities and, hopefully I will be able to continue to do research in areas that may be of value to the communities. When I mean communities I mean everyone that is affected by these developments.   

Cloud computing imposes some interesting restrictions on our developments, and some interesting opportunities. The biggest opportunity is of course facilitating velocity. Recall in the shrink-wrap days how software was upgraded? Usually annually and with a steep price attached. People, Ideas & Objects will be upgraded constantly, possibly by the second. There is no way that I can see an industry such as oil and gas, with the inherent issues ahead of them being able to adapt quick enough if they are not using cloud computing for their ERP system. SAP is the bureaucracy, as is People, Ideas & Objects are the nimble, agile and high velocity oil and gas industry.

One very interesting change from traditional systems is the stateless nature of cloud computing. If we go back to our Technical Vision, we see that Asynchronous Process Management is a cornerstone of our application. This means that when partners in a Joint Operating Committee vote for a capital expansion, this may bring in elements of game theory. Therefore some producers may withhold their vote until they can determine another firms decision. This is asynchronous in that the voting process may be held up for a few weeks. This asynchronous process will have to be written to new tables in the database to reflect its percent of process completion. Not a difficult thing to do, but to leave the variables in state could lead to technical difficulties in the Cloud computing model and potentially lost data. Its an architectural change in the way that cloud computing operates.

I can see in my future many oil and gas company managers arguing that their involvement in this critical area should be considered, and a different architecture be adopted. If we go back to Professor Carlota Perez, the People, Ideas & Objects strategies are the competitive way in which the Information & Communication Technology Revolution competes with managements charade. Management have a choice, either accept the changes that are happening or die. I, after six years have a preference towards your demise, however I won't state it here, their may be children that are reading this.

Again this Sun Microsystems paper is by far the best that I have seen on the concepts around cloud computing. It fits into how the oil and gas industry is able to accelerate its performance to the level that is needed to meet the market demand for energy. Meeting these demands for the remainder of this century. If your an investor or shareholder in oil and gas that thinks this alternative form of organization meets with your needs. Please review our Funding Policies & Procedures. And if your a potential member of our user community or interested in the Community of Independent Service Providers, please join us here.

P. S  I am impressed by Apple's new iPad. The only question I have about the device, is what do you need an office for?

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9, 10, 11, ... 15, 16

Lets take a moment to review the compelling reasons for users and producers to join People, Ideas & Objects. The point of these is to provide both the understanding of what is possible and what is at stake. The first quarter of 2010 is a time in which we are raising the money necessary to begin development and define the Preliminary Specification. Those producers that are interested in funding these development should follow our Funding Policies & Procedures.

1.    The first reason to join this development is that it is generally agreed to that the easy oil is gone. Exxon has stated that an additional $20 Trillion in capital will be needed over the next 20 years. This does two things. It first identifies a relatively small window of opportunity to reorganize to meet these challenges. Do we believe the bureaucracies are capable of undertaking this increased load? The second thing is that it quantifies the scope of the problem to be larger then anything the industry has faced before. Doing more of the same and faster only leads to running into more problems faster. Organizing for this challenge is captured in the Draft Specification which aligns the industry to this task.

2.    Complex Adaptive Systems (CAS) are becoming the key differentiators of software development capability. Firms are achieving 500% increases in productivity by using Agile - Scrum methodologies. People, Ideas & Objects has been conceived under the basis that self organizing teams provides us with advantages over the traditional software houses. We are not applying these principles just to the developers either. Our user communities and the Community of Independent Service Providers will all subscribe to the Complex Adaptive Systems methodology. It is not within our domain, but I would suggest that each and every Joint Operating Committee could achieve sizable performance and productivity gains as a result of pursuing CAS. And if they do, they will have a dedicated software development team and communities that are able to keep up.

3.    You say you want a revolution. That's a good thing. National Public Radio prepared a timely graph that showed where the jobs are going to be in 10 years. Clearly all elements of the work that is being done at People, Ideas & Objects provides the greatest promise of job growth. It's important in this day and age to look at predictions with a healthy dose of scepticism. NPR were using the U.S. Federal Governments Bureau of Labor Statistics, therefore I don't think that much better data can be had.

4.    Being one that has lived the consequences of telling the bureaucracy its redundant, you would think I would have learned the lesson to keep my mouth shut. Unfortunately not. Management is wrong in not making this software development project timely. Their response of shooting the messenger has been typical of the vested interests that are so out of date in today's economy. They have proven to me that they are incapable of falling on their sword and doing the right thing. This is why we appeal to the Investors and shareholders in oil and gas for our funding. Providing them with an alternative means of organizing their oil and gas investments. Recently John Bogle of the Vangaurd Group, Professor Wanda Orlikowski and Professor Carlota Perez cited management is wrong in terms of their motivations and actions.

5.    We have identified a budget of $10 million be raised by the end of March 2010. These funds are not adequate to complete the Preliminary Specification, however, they are a start and are determined to be the most that we would be able to expend in 2010. Funding of the budget by enlightened oil and gas companies, investors and shareholders is the key determinate for the User community and Community of Independent Service Providers to form and commence this work.

6.    In addition to identifying the issues and opportunities that exist in the oil and gas industry. People, Ideas & Objects have developed a strong business model with a significant value proposition for its subscribing producers. Allocating the costs of development over the subscribing base of producers brings value to the industry. The cost-plus method of charging firms $1.00 / barrel of oil equivalent / year may generate upwards of $120 million / year for People, Ideas & Objects developments. At $10 it brings in substantial revenues and continues to be less then 1/10th of a percentile of the producers revenues.

7.    I recently had the opportunity to document the user interface of the People, Ideas & Objects. Our approach has always to deal with the business of the energy business and not to sell the next version of some widget technology. The reason we are moving to the "Synthetic Worlds" and Avatars is that the Draft Specification anticipated this innovation. To make it work we added three "Marketplace" modules where avatars will be able to conduct business virtually. Additionally to enforce the Compliance & Governance Module into this environment we came up with the Military Command & Control Metaphor for the producers in the Joint Operating Committee to remain compliant with the firms governance and compliance needs. All of these are contained within the module specification of Draft Specification. 

8.    Professor Carlota Perez in a recent document that we reviewed declared now is the time in which the Information & Communication Technology Revolution (ICTR) is about to begin. This will be a time of great value generation for the oil and gas producer, the user of People, Ideas & Objects application modules, the Community of Independent Service Providers and society. People want to move forward in these areas and the beginnings of something great is starting to be realized. This is not a short term trend. It is something that will carry our economy for the next 20 - 30 years.

9.    A trend has been noted in the academic community. Since the economy has somewhat stabilized, many papers are being written on how business and industries can build from the recent economic crisis. Clearly these endorse the economic time frame in which change can and should be orchestrated. What needs to happen today is management to be provided with the motivation to get moving and financially support these developments. This academic support should resonate with our identified market for funding. The investors and shareholders in oil and gas companies.

10.    I recently noted how we differed from most Open Source projects. That although we are not technically compliant with any of the Open Source Initiatives licenses, producer firms need to know that they can review, test and ensure the software code they are using meets their needs. I would expect that this will eventually fall within the domain of a proxy for the producers. Some group or team comprised of the Chartered Accounting Firms would probably be able to assure the producers of this on an annual contract.

11.    The Draft Specification is a result of the Preliminary Research Report and many years of research into how and what an application for this new era in oil and gas would look like. Much of this research has been in the area of Transaction Cost Economics. Professor's Richard N. Langlois, Carliss Baldwin and Oliver Williamson have provided the academic strength necessary for an application operating in the oil and gas industry. Transaction Cost Economics research was cited as the reason that Professor Oliver Williamson won the 2009 Nobel Prize in Economics. It's timely and critical recognition that the energy industry needs to build on these principles. Principles that are a part of the Draft Specification.

12.    Recently we documented the strategies of innovative oil and gas producers. How there focus needs to be on developing their earth science and engineering capabilities within the Joint Operating Committees of which they belong. Application of these capabilities to their asset base is how their competitive advantages are earned and are solely dependent on the uniqueness of their asset base and scientists. People, Ideas & Objects competitive advantage is ensuring that we provide the innovative oil and gas producer with the most profitable means of oil and gas operations.

13.    Oracle have spent a remarkable amount of money, $39 Billion, in configuring their new Fusion MiddleWare application offering. Within these applications it is expected that the energy producer will have to expend additional money in terms of oil and gas features. These costs are unique to the firm and will therefore be incurred by them to provide Oracle a return on their investment in Fusion MiddleWare. This does not address the issues that industry faces today. Issues that I documented in May 2004 in the Preliminary Research Report.

14.    Effective March 31, 2010 we have implemented a penalty structure for those producers who decide to wait while others do the heavy lifting. The penalties are structured to assess any firm that hasn't participated with 300% of the years fees. Therefore any firm that hasn't paid on April 1, 2010 will have to pay $4.00 per barrel of oil equivalent. These fees and penalties are retroactively payable as well. If a firm decides to join the group in 2012, fees and penalties for 2010 and 2011 will also need to paid in full before participation in the communities. It is  recommended that firms participate early as that is the time in which they can assert the greatest impact on the product quality and communities development. Coming in at 2012 will provide little value in terms of how the application and community are able to deal with the unique assets and business' of the producer.

15.    As I write this summary Apple has just announced their first quarter 2010 earnings. Steve Jobs was once asked what he wanted to do in life. His response was that he "wanted to put a ding in the universe". His earnings and Wednesday's announced iTablet may have enabled him to reach his aspirations. Truly spectacular that a company that is worth short of $200 billion can increase its business by 50% in one year. Tech Co. earnings are the proof that the "Sustainable Global Knowledge Society Boom" is here. People in oil and gas should review this project as their means of participating in this fascinating opportunity.

16.    I have been openly critical of Oracle and SAP product offerings. I'm not alone in that criticism. The oil and gas industry is a unique industry that can not be looked at from the perspective of a manufacturer or any other traditional industry classification. It requires a unique approach to its business and the systems that support the firms has to be unique as well. The Draft Specification consistently shows that the means of oil and gas operations, innovativeness, issue resolution and enhanced productivity are within our grasp. The recent Oracle - Sun merger provides us with a unique opportunity to capitalize on their scope and scale capabilities in developing and hosting an application such as People, Ideas & Objects. For the first time I feel excited that we are able to really build something special.

If you are a user that finds these reasons compelling, please join us here. Somehow all these concepts hold together. Imagine that.

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Perez, Double Bubble trouble

What I am trying to do in this post is to determine exactly where we are in the Information & Communication Technology Revolution. Is it over, are we half done, or is the best still to come. Is it as Professor Carlota Perez suggests a "Sustainable Global Knowledge Society Boom" that we find ourselves in? And if so where are we in terms of that boom? Much of our research in the past six years has been on the faith that Professor Perez' theories would, eventually, become valid. It is now very clear, to me, that she is exactly right. Therefore, where is it precisely that we stand in terms of this Information & Communication Technology Revolution (ICTR) and transition, here in January 2010.

The 35 posts that have been written on Professor Perez' work can be aggregated on this label. I recall reading many times that she did not believe the 2000 dot com meltdown was violent enough to cause people to want to change. She consistently suggested that more would have to happen in the finance area, and that housing would probably be the area that it did show. This going back to at least 2005.

This paper argues that the two boom and bust episodes of the turn of the century—the internet mania and crash of the 1990s and the easy liquidity boom and bust of the 2000s—are two distinct components of a single structural phenomenon. They are essentially the equivalent of 1929 developed in two stages, one centred on technological innovation, the other on financial innovation. Hence, the frequent references to that crash, to the 1930s and toBretton Woods, are not simple journalistic metaphors for interpreting the ‘credit crunch’ and its solution, but rather the intuitive recognition of a fundamental similarity between those events and the current ones. The paper holds that such major boom and bust episodes are endogenous to the way in which the market economy evolves and assimilates successive technological revolutions. It will discuss why it occurred in two bubbles on this occasion; it examines the differences and continuities between the two episodes and presents an interpretation of their nature and consequences. p. 779

1. Introduction

This previous quotation is text that to my mind is the same since we started following her theories. Accurate and prescient. Perez parses down the nature of this dual crash into what she calls Major Technology Bubbles (MTB) and Easy Liquidity Bubbles (ELB). Both are necessary in order to impose the scale of changes necessary to make society move on to the higher value economic order based on, in this case, the Information & Communication Technology revolution (ICTR).

This paper proposes to distinguish major technology bubbles (MTBs) as a special class of bubbles that constitute a recurring endogenous phenomenon, caused by the way the market economy absorbs successive technological revolutions. They are different both in nature and consequence from the bubbles induced by excess liquidity from whatever source and from thePonzi finance moments identified by Minsky. p. 780

and

History has given us the ideal laboratory: an MTB—the 1997–2000 internet mania—followed by the easy liquidity bubble (ELB) of 2004–07. The fact that they took place in rapid succession provides us with clearly comparable and compatible data. Yet it also suggests that they are strongly connected and interrelated. p. 780

In terms of where we stand today, we are overcoming the immediate consequences of both of these market collapses. These phenomena are thankfully "complete" in Professor Perez' mind. Complete in the sense that they do not require any further market collapse in order for the changes be made in the marketplace. If there is no other shoe to drop, we can continue on this journey knowing that the pain will not escalate from here.

2. Major technology bubbles as endogenous phenomena

The computer industry has been profitable, and a major part of our lives for the past 40 years. Are these past 40 years the benefits that we should expect as the effects of theICTR? I hope not. If this were the end of the ICTR we should expect to have our dog food delivered from the fine people at www.pets.com. Not the type of value that I think the Users andCISP need to provide the oil and gas producers.

An MTB is not an accidental event. It regularly occurs midway along the process of assimilation of each technological revolution. It is the paroxystic culmination of 20 or 30 years of market experimentation, centred on new breakthrough technologies and spurred by the extraordinary profits produced by them. p. 780

To think that we are only half way is the news that shows we have a long time left to travel on the ICTR. A specific technology that we are using now is the agile development methodology. One in which the writing of software is up to 500% faster then just a few years ago, a methodology which was substantially faster then the previous iteration. From a development point of view, we are only beginning to develop software much faster and that is much more usable. Reflecting that there is more to come from theICTR. 

The ensuing collapse not only results in the return to more sensible real values and a reconnection with the real economy; it also signals the end of a period when financial capital is in control of investment to a period in which control passes over to production capital. p. 780

As Perez predicted, financial capital grew too large in terms of its share of the global economy. With not enough work to do, they found ways to amuse themselves and the consequences are reflected in today's economy. Perez had consistently stated that financial capital would recede to be replaced by "production" capital to fuel the remainder of theICTR.

The process follows a basic stable sequence: irruption of the revolution, two or three decades of a turbulent installation period ending in a major bubble collapse, then arecomposition of the socio -institutional framework that regulates finance and sets the conditions for the final deployment period, a time of more organic growth that lasts until maturity and exhaustion are reached, setting the stage for the irruption of the next technological revolution (Perez, 2002 [2003], 2007). p. 781

Perez is clear how this will happen.

It is because of human resistance to change and organisational inertia in existing institutions that the introduction and diffusion of the new technologies and their best practices has to be forced by ferocious competition and by the high profit pressures imposed by the stock market. p. 781

Review of the ideas that comprise the Draft Specification. The strategy and business model of this software development. The User and CISP focus on creating a community, having that community direct the development of the software. Are all built upon using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. Producers that join us will have a higher level of performance vs. those that remain in their current form. Software firms such as SAP and Oracle will have difficulty meeting the demands of an innovative producer. Competition in both the performance of the producer and the systems that support them will be the means in which change is exercised.

From the confrontation between them will emerge the novel leaders and the industries that will serve as engines of growth of the economy. At the same time, the experience in using the new technologies, especially the new infrastructures, will result in a different set of best practice principles for efficiency—a new techno-economic paradigm—applicable to all other industries and serving to overcome maturity and increase productivity across the whole economy through more efficient equipment, better organisational models and much wider market reach. p. 781

So competition is how the benefits of the Information Technology Revolution (ITR) come about. When will this happen?

2.3 The unwitting role of the MTB

Did we miss it? Are we too late, or too early? Here is where I think some confusion is a natural course of the events we have been through. There are two boom bust cycles occurring at the same time. We are finishing off the Deployment phase of the WWII boom driven by the age of the automobiles, oil and petrochemicals. And secondly transitioning from the Installation to the Deployment phase of theICTR.

Technology has been a big part of the problem. Over building the worlds fiber optic networks was a large part of the demise of many companies on the NASDAQ exchange. This was necessary, but also not part of the real advantages that society would garner. Those advantages would occur as the existing industries used the fiber optic cable in new and innovative ways. 

So that is how the market system revitalises the economy every half century or so. When a set of new technologies reaches exhaustion of products, productivity increase and markets (as mass production did in the late 1960s and early 1970s), financial capital abandons its old clients and joins the new entrepreneurs, giving strong support to technologies that had been in gestation for years but limited by the prevailing paradigm (Perez, 2002 [2003], pp. 27–32). The financial success of this process leads to theMTB , which not only intensifies the full experimentation with the new technologies and the modernisation of most industries, but also fosters over-investment in the new infrastructures. p. 789

What Professor Perez is saying is that their can't be "not enough fiber optic networks". There can only be too many or none at all.

These usually need to reach full coverage to be effective and thus require high up-front investment and take time to become profitable. It is the switch to short-term gains during the bubble that attracts the necessary capital to be poured into the infrastructural networks of each revolution. p. 789

Google, Apple, Oracle and Cisco are new-era companies that became household names in the run up to the dot com meltdown. Perez suggests these firm make for a new and necessary aspect of the modernization of the economy.

When the boom and bust of the MTB mark the end of this installation period, most of the economy has been modernised, ample coverage of the new infrastructure is in place and new corporate giants are ready to lead the expansion by taking full advantage of the new potential. But by this time, the financial world will have acquired the habit of being in control of investment and of getting constant high returns. Quarterly profits will have become the main measure and production companies will find themselves forced to avoid long term projects and to constantly deliver short term gains. For this reason, the golden age of more harmonious growth—or deployment period—that follows in the last two or three decades of each surge of development will depend on the capacity of the State to restrain the financial casino that typifies the bubble and to hand over power to production capital, allowing its longer term horizons to guide investment once more. This has usually involved changes in the financial architecture and in the incentive structure of investment. pp. 789 - 790

We see a clear definition of the time frame that we are in. New leaders have established themselves. The MTB and ELB have occured. The installation and overbuilding of the networks and technologies to drive the future. The continued pressure to performance based on quarterly earnings. The need for financial reform, hopefully only started last week. Everything that is difficult seems to be behind us. The harmonious growth of the golden age is upon us and we will use these technologies to the benefit of society, people and organizations. 

On this occasion, such regulatory and institutional changes have had to wait until the collapse of a second, much greater and more global boom and bust. p. 790

These points are clear in Professor Perez' writings, what is different this time, to the four other great surges, is that it occured in a two step process, the dot com meltdown and the financial crash of 2008.

5.2 The double bubble and the full consequences

The unique characteristic of having two bubbles collapsing has consequences of its own.

What came after the internet bubble collapse was not the restructuring of the real economy that tends to occur in the aftermath but a casino revival that only fulfilled part of that task. p. 800

and

After the meltdown of this second bubble, the actors in the real economy—both producers and consumers—see themselves as the direct victims of the false promises of the casino and its disastrous consequences. Finance has done its job and overstayed its welcome at the helm of investment; it is time for production capital to take over and to fully unleash across the world the wealth-creating potential already installed. This will require governments to once again design appropriate policies and provide the general guidelines. pp. 800 - 801

Right here, right now. This is where People, Ideas & Objects and the Community of Independent Service Providers, the user groups and the innovative oil and gas producer all fit. Now is the time to begin this journey and build the applications defined in the Draft Specification. That is what is at stake, and that is the opportunity.

Nevertheless, the conditions are not necessarily all set for this change. Several authors have pointed out that finance has come to dominate the economy to an extent that could be termed ‘financialisation’ (see Arrighi, 1994; Dore, 2008; Krippner, 2005; van Treeck, 2009) and that this constitutes a fundamental change in the market economy. p. 801

This last point doesn't necessarily apply directly to these communities. However it is interesting to see that these technology giants, Oracle, Apple, Cisco and Google do not see their enhanced role in the economy.

On the other hand, the emerging leaders of the new production capital, the new ICT giants that would serve as engines of growth of the world economy and shape the deployment period, are yet to recognise and wield their power and influence in the course of events, nationally and globally. If in the fourth surge the chief of General Motors could rightly say that what was good for GM was good for the USA and viceversa; today the global ICT companies could say that what is good for them is good for the world economy. Yet they do not seem to be questioning the leadership of finance or vying for a place at the top. Whatever their participation, the outcome will be resolved in the political arena. p. 802

What's good for Apple or Oracle or Google or Cisco is good for the economy.

6. Conclusion: the special nature of MTBs and the policy challenge

The fundamental implication of the interpretation presented here is that what we are facing is not just a financial crisis but rather the end of a period and the need for a structural shift in social and economic context to allow for continued growth under this paradigm. Both globalisation and national prosperity will depend upon and be shaped by the longterm solutions implemented to face the challenges posed by the current recession. p. 803

If you are an investor or shareholder that would like to participate in this new economy and support the development of these applications, please follow our Funding Policy & Procedures. And if you are a user that would like to be involved in building these applications or become a member of the Community of Independent Service Providers please join us here.

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And we're back

Something happened in the blog that caused the "Post Pages" feature of the blog to fail. I have turned that feature off and if you now select any individual post, it will render. A related problem was occuring with the comments feature. That too has been remedied. Selecting another post within a post will not render and this is being worked on. Those accessing content through a reader are redirected to a interim page that will let you click through to the current post. Please resume normal reading patterns. ;)