Podcast # 3 - Seven Organizational Constructs

 People, Ideas & Objects Preliminary Specification has seven organizational constructs which work to establish a culture of reserves preservation, performance and profitability. 

Pod up. 

AI, The Fourth Industrial Revolution, Part III

Rebuilding Oil & Gas for the Fourth Industrial Revolution

Reconstructing the oil and gas industry with a culture of reserves preservation, performance, and profitability demands a comprehensive approach. People, Ideas & Objects’ Preliminary Specification leverages seven Organizational Constructs to define, support, and guide this transformation, creating dynamic, innovative, accountable, and profitable producers and a revitalized industry. Information Technology, including Artificial Intelligence (AI), is one of these constructs.

Our expectation is these tools will assist society in maintaining North American political and economic prosperity for the long term. It is the most powerful economy which consumes the most energy. It’s difficult to see how society's leadership would be established without independence in its sources of energy. We are the largest consumer of energy and we are the most efficient energy consumer. Contributing up to 25,000 man hours of labor in each barrel of oil equivalent. And now untold leverage of the continents established cultural strengths through Artificial Intelligence. 

Lessons from past Industrial Revolutions—shrinking timeframes, productivity booms, labor shifts, new markets, and social challenges—suggest AI’s Fourth Industrial Revolution could be faster and more disruptive than its predecessors. Its ability to automate complex tasks and process vast data could unlock unprecedented value, but only if society adapts to its challenges. Focusing on AI’s potential for system-level insights, as in neuroscience, highlights a key opportunity: AI could redefine how we create knowledge and value, but humans must guide the paradigm shift, just as they did with steam, electricity, and IT.
The structural conflicts in oil and gas, driven by misaligned business models, mirror issues in politics, academia, and healthcare. These conflicts, often obscured by society’s wealth, become glaring when their destructive impact stalls progress. Current officers and directors, prioritizing personal gain, resist reform. People, Ideas & Objects urges them to choose to lead, follow, or step aside.

As we noted in a prior blog post covering Ark Investments Podcast of Dr Jin Huang Li of Stanford University. Dr. Li noted, institutional inertia and incentives can stifle holistic approaches. Academia rewards published papers on narrow topics, not risky, interdisciplinary leaps. If we’re to fully harness AI for system-level breakthroughs, we might need new structures-funding models, collaborative networks, or even AI-assisted research platforms-that encourage big-picture thinking. Is this where AI forces us to rethink not just tech but how we organize knowledge and innovation?

David Hume’s quote about ”no amount of reasoning will generate an idea” can’t be verbatim attributed to him. However it’s believed to be derivative of his quote. 

All the perceptions of the human mind resolve themselves into two distinct kinds, which I shall call IMPRESSIONSand IDEAS. The difference betwixt these consists in the degrees of force and liveliness, with which they strike upon the mind. (A Treatise of Human Nature Book I, Part I, Section I)

The Preliminary Specification empowers oil and gas leaders to harness AI, redefining the industry for a prosperous, energy-independent future.

People, Ideas & Objects User Community. Our Priority and Key Competitive Advantage

I’m delighted with the competitive advantages that define People, Ideas & Objects, centered on our user community, Intellectual Property, and research. These elements showcase our strategic clarity and expertise. While our software code is a vital part of our Intellectual Property, we intentionally maintain no in-house commercial software development capabilities. By partnering with Oracle Consulting Services, we’ll accelerate development and deliver superior-quality products. With AI now enhancing software development tools, we avoid redundant investments in building these capabilities internally, ensuring efficiency and focus.

Our user community’s structure is designed to empower its members to achieve our shared goal: providing North American oil and gas producers with the most profitable means of operations. Three innovative components enable this. First, only our user community members are licensed to create derivative works from the Intellectual Property of the Preliminary Specification. Second, our contracted and licensed developers are exclusively guided by the user community’s input on what to build, how, and why, ensuring focus and alignment. Third, the user community controls its own budgets, ensuring accountability and preventing reliance on “blind sleepwalking agents of whomever will feed them” driven by external agendas.

On April 7, 2025, we released a paper titled “Hyper Specialization in Today’s AI & IP-Enabled Workforce, exploring the powerful synergy of AI, Intellectual Property, and our user community.” This paper outlines how these elements converge to create substantial value for the oil and gas industry. It details how our user community, with their service providers, will leverage strategic competitive advantages to rebuild the industry’s culture around reserves preservation, performance, and profitability.

Our User Community, Leading Oil & Gas’ Artificial Intelligence Development and Implementation, a.k.a. The Fourth Industrial Revolution 

This well “reasoned” heading resonates with the vision I’ve always held of our user communities role for development and implementation of the Preliminary Specification and for the long term. 

There is no one country, company or individual who “won” the Industrial Revolution. Everyone did. The same can be said for the Internet as it will be for Artificial Intelligence. In the Information Technology’s Industrial Revolution and as it will be again in the Artificial Intelligence Industrial Revolution, there are those who will choose not to participate. Primarily due to a lack of aptitude and change resistance. It is their choice and they are satisfied with that. 

For those with the aptitude, ability and desire to pursue the benefits of this fourth Industrial Revolution and apply their skills towards North American oil & gas. Where are they able to participate and what benefits will these changes provide for them? For accounting and administrative purposes our user community is their choice. 

On January 10, 2025 People, Ideas & Objects published a paper entitled “Catalysts for Cultural Change: The Leadership Role of People, Ideas & Objects User Community” and subtitled "Reconstructing Dynamic, Innovative, Accountable and Profitable Oil & Gas Producers.” This paper seeks to provide the potential user community member with a clear understanding of the role, the tasks and expectations, what compensation is earned and the phases of development among many other elements of the reconstruction and rebuilding of North American oil & gas producers. 

What has ailed the oil & gas industry is predominantly poor leadership. What will be needed to bring about a dynamic, innovative, accountable and profitable oil & gas industry is leadership. In accounting and administration our user community provides the leaders for this cultural transformation. And that is the comprehensive vision needed for the industry, and what our user community will provide. 

If this thinking is consistent with yours, then action is needed on your behalf. 

Profitable Production Rights, Podcast # 2

Our second podcast deals with Profitable Production Rights. How People, Ideas & Objects and our user community generate the revenues we need to develop and support for the long term the Preliminary Specification. I should note service providers generate their revenue through direct billing to each Joint Operating Committee. 

Pod Up. 

AI, the Fourth Industrial Revolution, Part II

The oil and gas industry is widely recognized for the poor quality of its accounting data and information. This deficiency is not attributable to the competence of accounting professionals or the limitations of ERP systems, both of which operate under challenging circumstances. Rather, it appears to stem from a desire among officers and directors to maintain opaque accountability, achieved by deliberately underfunding these areas. Consequently, accounting capacities are underdeveloped and existing capabilities degrade, leading operations departments to often disregard accounting information in favor of generic reserves estimates for decision-making.

A concerning trend, framed as addressing 'speed and complexity,' is emerging within oil and gas accounting and potentially other sectors. This could pose significant challenges for unprepared companies. In contrast, agile producers could potentially leverage innovative business models like our Preliminary Specification. And achieve superior results with fewer resources, faster timelines, and lower costs. Technologies such as the Internet of Things (IoT) enable field data capture, but their true value lies in data utilization. Our Material Balance Report, for instance, captures production-related data and seeks to automate derivative processes.

However, it is unlikely that officers and directors within producing firms will endorse the Preliminary Specification. Its adoption would implicitly acknowledge their responsibility for current industry inefficiencies. We estimate ongoing monthly natural gas revenue losses across North America due to overproduction at $16.8 billion per month, presenting both strong motivation for corrective action and significant reasons for their continued inaction.

If it’s the Fourth Industrial Revolution…

What “lessons learned” can we gain from a review of the prior three Industrial Revolutions? In terms of time and major economic findings, what, why and how can we project economic value will arise during Artificial Intelligences, Industrial Revolution? What are the impacts we can anticipate in the areas of productivity, markets and labor?

Time Dynamics of Past Industrial Revolutions

As we navigate the Fourth Industrial Revolution, spearheaded by Artificial Intelligence (AI), examining the preceding three revolutions offers valuable lessons. Key questions arise regarding the projected timeline for AI's economic impact and its anticipated effects on productivity, markets, and labor.

Historically, the First Industrial Revolution (1760-1840), driven by steam and mechanization, unfolded over approximately 50-80 years, its pace dictated by infrastructure development and capital investment. The Second (1870-1914), characterized by electricity and assembly lines, took roughly 40-50 years, benefiting from existing industrial foundations. The Third Industrial Revolution (1969-2000s), centered on computing and the internet, matured over 30-40 years, accelerated by hardware standardization and global communications.

This historical context prompts debate about AI's maturation timeline. One perspective suggests that Information Technology, a precursor, took approximately 65 years (from 1950 to 2015) to fully deliver its material gains. By this measure, AI, despite its current rapid advancements and unprecedented infrastructure investment, is only now beginning to generate widespread, tangible value.

However, venture capitalist David Sacks (President Trump’s AI and Crypto Czar) projects a dramatically faster trajectory: a potential million-fold increase in AI capability within just four years. His forecast rests on exponential advancements in three key domains:

• Algorithms/Models: Sacks anticipates a 3-4x annual improvement, potentially leading to a 100x enhancement in four years.

• Chip Technology: New GPU generations are expected to offer 3-4x performance increases per cycle, also potentially reaching a 100x improvement in four years.

• Data Center Compute: The rapid scaling of GPU deployment (e.g., xAI's growth from 100,000 to 300,000 GPUs, with millions projected) could yield another 100x increase in computational capacity.

Sacks argues that the multiplicative effect of these concurrent exponential growths (100x × 100x × 100x) could result in a million-fold capability boost by 2029. He notes that exponential growth is frequently underestimated; for instance, a 10x improvement every two years compounds to 100x in four years, not a linear 20x.

While Sacks' optimistic claim is rooted in current technological trends, its realization hinges on sustained innovation and continued infrastructure expansion. Such advancement promises breakthroughs across numerous fields, including engineering and geoscience, but also brings significant concerns regarding safety, ethics, and energy consumption. Given the transformative potential, minimal costs and associated risks, underestimating this exponential trajectory could prove to be a significant miscalculation.

Major Economic Findings of Past Industrial Revolutions

Learning from past industrial revolutions, we understand that despite predictions of rapid AI-driven change, full societal and economic integration will likely span decades. This extended timeline involves not just technological breakthroughs but also crucial infrastructure development, widespread business model adaptation, new regulatory frameworks, and societal adjustments. Consequently, initiatives like our People, Ideas & Objects framework, designed for continuous, iterative development with our user community and developers, are essential for this transition. A key lesson from history is the rising demand for new skills, highlighting the critical need for massive reskilling and upskilling to meet these evolving workforce requirements.

This need for profound adaptation is especially urgent in the oil and gas industry. The sector faces a severe crisis of trust in its leadership, exacerbated by significant financial damage across its broader economy. Amidst the unfolding Fourth Industrial Revolution, oil and gas producers must urgently move beyond a 'muddle-through' culture to one centered on resource preservation, performance, and profitability.

The future will be defined by the ability to effectively harness data, often in ways currently unanticipated—just as no one in 1760 could have envisioned today's world. This raises a critical choice: continue with strategies that have demonstrably failed, or implement a solution like the Preliminary Specification? This approach aims to establish the vital data, information, and infrastructure needed for a dynamic future, securing long-term capacities and capabilities within our user community and ERP software developers. To merely 'muddle through' with current approaches, given the stakes, is familiar but a deeply concerning prospect.

We’re Podcasting!

I've always quipped that I have a "face for radio and a voice for print." While our Preliminary Specification is packed with insights I could discuss for days, I was thrilled to discover Google's NotebookLM with Gemini, which can generate podcasts directly from this content.

I have consistently maintained that Intellectual Property (IP) and Artificial Intelligence (AI) work together in a mutually beneficial manner. This assertion is supported by the creation of our Podcast series. Our licensed user community members possess the rights to prepare derivative works from the Preliminary Specification. Therefore, as you will observe, the dissemination of the underlying concepts of the Preliminary Specification is significantly enhanced through these AI generated podcasts. This demonstrates the significance of IP and AI in the context of People, Ideas & Objects development.

These initial episodes are first drafts, and I'll be refining them as I become more familiar with the process and the tool. I personally dislike acronyms and apologize for the use of them by the presenters. These AI presenters do a fantastic job otherwise, and I'm excited about the potential!

I plan to release new episodes twice a week for the next two weeks and then 1 per week after that. I invite you to check out our debut, "Profitable North American Oil & Gas." 

Comments or questions are always welcome. 

Pod Up

AI, The Fourth Industrial Revolution, Part I

Artificial Intelligence, the Fourth Industrial Revolution 

Artificial Intelligence (AI) marks the dawn of the Fourth Industrial Revolution, following steam, electricity, and Information Technology. While today’s AI capabilities may be overhyped, their rapid evolution is undeniable—each use yields results ranging from brilliant to underwhelming, yet consistently improving on a steep trajectory. Ignoring or dismissing AI risks diminishing future prospects in an era of relentless advancement.

My lifelong fascination with computers has driven me to apply technology in ways that excite users but often bore IT professionals, who see such solutions as commonplace. My focus is on users—my true customers—leveraging an intuitive understanding of oil and gas and IT to deliver innovative, problem-solving solutions. This passion fuels People, Ideas & Objects’ mission to ensure the most profitable means of oil and gas operations.

Spending my days exploring issues and opportunities, I find keeping pace with AI’s rapid advancements challenging. (Prospective members of our user community should join me in this task here.) Tools like ChatGPT, Grok, and Gemini leapfrog each other weekly, reshaping the Preliminary Specification, our development, user community, service providers, and industry configurations. While no major changes have been made, AI will likely accelerate our commercial release date and enhance product quality—whether through additional features or improved performance.

In our paper “Hyper Specialization in Today’s AI & IP Enabled Workforce” we explored AI’s dominance in chess and go, where limited variables enabled innovative strategies developed by AI. Programming languages, with broader but defined domains, may soon follow, with AI-driven coding unlocking new methods, innovations and architectures. In oil and gas, our Preliminary Specification’s business focused AI module, integrated with the industry’s scientific foundation, harnesses the fierce AI competition to create dynamic, innovative, accountable, and profitable producers, redefining the industry’s future.

Artificial Intelligence in Oil & Gas 

Oil & gas presents a challenging future in what is a scientific business. People, Ideas & Objects Preliminary Specification will bring about the ability for producers to commercially compete in North American capital markets. Providing for the most profitable means of oil & gas operations everywhere and always. By supporting the scientific disciplines with comprehensive, actual, factual financial information to base their decisions. Creating a dynamic operational environment which ensures alternative strategies can be deployed and producers profitability is maximized. An accounting and administrative resource that is unavailable to them today, and if it were, would the industry be in the state that it's in? Or, would other decisions have been made by understanding what the business impact of their decisions were. 

When it comes to the use of AI in oil & gas. From the commercial side of the business the old adage of “garbage in, garbage out” would need to be created if it did not already exist. There is nothing that can be done with estimated, highly aggregated, then summarized data into information when its data has no consistency or meaning. There’s a reason that the scientific approach in oil & gas has dominated. It’s due to the lack of any usable accounting information. As we hypothesize, producers split their focus to the operational side of oil & gas, the science, and the commercial side which focuses on the corporate accounting, tax and regulatory requirements. The Preliminary Specification resolves this conflict by using the Joint Operating Committee as its key Organizational Construct. Where operations will be supported with a business perspective in which to make its decisions. 

Our Artificial Intelligence module builds off the data infrastructure prepared in our Performance Evaluation (Joint Operating Committee focus) and Analytics & Statistics modules (Corporate focus). It also conducts the processing and generic or base necessities of the producers and Joint Operating Committees data to alleviate the high costs associated with Artificial Intelligence by sharing this base infrastructure across the producers. Allowing producers to limit their AI costs to the high level, competitive advantages they can generate from the tool. 

A Fourth Industrial Revolution 

The FYI Podcast from ARK Investments, featuring Dr. Jin Hyung Lee of Stanford University, highlights the limits of binary hypothesis testing in neuroscience and the need for a holistic, system-level approach—accelerated by Artificial Intelligence (AI)—to spark a Fourth Industrial Revolution. This blog post draws parallels to oil and gas, where similar narrow thinking has led to systemic issues. Embracing AI and human-driven holistic design, as enabled by People, Ideas & Objects’ Preliminary Specification, could redefine the industry’s future.

Past industrial revolutions—steam, electricity, and Information Technology—displaced manual labor and repetitive tasks, freeing humans for higher-order work. Steam powered factories, electricity enabled production lines, and IT automated data processing, each unlocking new value and industries. AI now supercharges hypothesis testing, analyzing vast datasets and running simulations at unprecedented scales. In neuroscience, Dr. Lee notes that focusing on isolated variables, like amyloid plaques in Alzheimer’s, misses the brain’s complex, interconnected systems. AI can process multidimensional data—neural networks, genetics, and behaviours—revealing insights beyond siloed approaches.

In oil and gas, similar limitations persist. Narrow, operational-focused decision-making, driven by inadequate accounting data, has crippled profitability. The Preliminary Specification addresses this by aligning operations with comprehensive financial insights via the Joint Operating Committee, leveraging AI to process complex datasets and optimize decisions. However, AI excels at specific tasks but lacks the human capacity for holistic reasoning. Dr. Lee faced academic resistance to system-level approaches due to entrenched incentives favouring narrow research—a parallel to oil and gas leadership’s resistance to change.

Humans must lead the Fourth Industrial Revolution by framing questions, designing system-level models, and interpreting AI outputs. Just as steam empowered engineers and IT enabled analysts, AI can enhance oil and gas professionals’ ability to build dynamic, innovative, accountable and profitable operations. The Preliminary Specification’s AI module, built on robust data from our Performance Evaluation and Analytics & Statistics modules, enables producers to harness AI for competitive advantage, redefining what’s possible in a capital-intensive industry. This revolution isn’t just about speed—it’s about creating a sustainable, innovative future. 

Arbitrage Strategy, Part V, Conclusion

In our April 7, 2025 paper, “Oil & Gas Arbitrage: The Market Finds a Way,” and throughout this series, we pose critical questions about the oil and gas industry’s trajectory. Can the current leadership address its financial, operational, and political challenges? Is the Preliminary Specification the essential first step to organizing a resolution? How much time remains before control slips away—or has that already begun?

The root of today’s crisis lies in the industry’s chronic overcapitalization of assets. Bloated balance sheets, built on the mantra of “building balance sheets” and “putting cash in the ground,” reflect a cultural obsession with inflated property, plant, and equipment (PP&E) accounts. This practice, a common method to manipulate financials, has led to obscene financial statements that obscure what the industry’s true objective should be: profitability.

The consequences are stark:

• Bloated assets that are worth little or negative value as they demand cash to produce. 

• Bloated assets represent a dollar for dollar equivalent in bloated profitability. 

• Are also represented today in shareholders equity that in almost all cases would be negative if asset values were appropriately restated. 

• Therefore leaving producers with debt that is leveraged in logarithmic measures. 

• Decades of structural working capital deficiencies, and poorly performing cash flow metrics incapable of maintaining basic business operations. 

• Assets that are incapable of performing competitively to generate adequate free cashflow and profit. 

• Leading to declining productivity as admitted in Saturday’s May 17, 2025 WSJ.

• Producers blame their investors' demands for dividends. 

• Unaware that profitable operations provide a producer with independence and control of their direction. 

• Severely deprecated and diminished industrial capacity in its secondary industries. Actively pursuing business opportunities outside of North America and in other industries. 

• Investors and bankers abandoned the producer's capital structures a decade ago due to their lack of understanding why profits are necessary. 

• Which is worse, having investors abandon the producers for cause, or producers doing nothing about investor concerns for over a decade. 

• Acceptance or action by officers and directors to resolve the issue directly. Involves their admission of responsibility and culpability. 

Producers mistakenly equate high PP&E balances with reserve value, believing this upholds their fiduciary duty. Financial statements measure performance, not value. A high-performing producer would deplete greater capital costs on the income statement while remaining competitive. If the SEC prioritizes high asset values, it should reassess its mandate. The Preliminary Specification establishes a culture of reserves preservation, performance and profitability.

Officers and Directors Trajectory

The oil and gas industry’s dysfunction is deeply cultural and systemic. We can either attempt to reform this broken culture or reject it entirely, rebuilding with the vision of People, Ideas & Objects’ Preliminary Specification. Engaging with the current culture ensures its survival, fueled by higher commodity prices that only amplify its excesses and rewards the entitled. This business model is obsolete, has utterly failed, and will continue to fail—believing otherwise is delusional.

As investors demanded change in 2015, they must now lead the industry’s reconstruction through our Arbitrage Strategy. This is a daunting task, with asset values tied to the present value of projected reserves, as determined by reservoir engineers’ industry cost averages, not historical company figures. Producers’ scientists rely on these valuations to prop up balance sheet asset values, but these assets underperform and require significant revaluation to reflect their true worth. Cash-strapped producers are beginning what may become a broader liquidation, where real asset prices will emerge. See here. 

Investors, skilled at profiting from such opportunities, face assets with undefined management and operational frameworks. The Preliminary Specification is the only viable solution, but it requires funding for development. Given the oil and gas ERP market’s historical challenges, I am not issuing equity or debt, as I cannot deliver the Preliminary Specification profitably to shareholders. Our value proposition benefits producers, and if they deem it undesirable, I accept that. However, funding for development must ultimately come from oil and gas production in some form.

Replacement Value of the Incremental Barrel 

What must dictate the price of oil & gas commodities is the high costs needed to bring the incremental barrel of oil equivalent to the market. North American producers have the highest cost production and fill the role of swing producers. Any legacy property with the ability to bring about lower cost production will benefit profitably until such time as that production has exhausted itself. Nonetheless the producers are faced with the high cost of exploring and developing oil & gas production and that replacement cost is the real cost of oil & gas on that market. 

Where else is it expected that producers will be able to acquire the financial resources necessary to sustain their production profile if the appropriate “replacement cost profits” are not derived from current production. If they’re relegated to maintaining a utility styled return on the properties investment, in an industry with an inherent steep cost inflation, investors will forever be at the behest of producers looking for further capital spending. 

An inherent characteristic of the economic “price maker” is that they’ll only bring on new production that’s profitable. What has happened in the process of dividing the producer in two, as our overall hypothesis suggests. Where exploration and production are handled by scientists. And the business is operated with regard to corporate accounting, tax and regulatory requirements by accounting. Two disparate worlds where neither is fully aware of the other's value. As a result, what has driven the interest, vision and direction of the industry since the early 1990s. Has been the pursuit of science in terms of what is the most interesting and fascinating science to be involved in. For example, conventional production has withered to small percentages of the production profile. In natural gas it’s at 21% of the total US production. Despite its cost and deliverability being far more profitable than shale. “Business” is a foreign concept to oil & gas producers, officers and directors. 

What we’ve also seen throughout the past three decades is characteristic of the Keystone Kops. Industry testing unproved hypotheses only to abandon them to the next great thing. SAGD, heavy oil, unconventional until the declaration that shale will never be commercial and clean energy is the future, to a 180 degree return to shale. And as of last Saturday's WSJ, peak shale is here. Never taking a moment to consider what could be done to iterate and innovate through various means and methods to make these areas profitable. 

This on top of poorly considered talking points such as drill baby drill when they knew they’ve all but destroyed the service industry. And when the U.S. president opens the door for them they say that’s not really what they want. It certainly is not the leadership anyone would want, but it’s the leadership we have. They’ve proven incapable of anything but lies and excuses. And make no effort to change their ways. 

Conclusion 

People, Ideas & Objects propose this Arbitrage Strategy to shift oil and gas from its stagnant “muddle through” culture to a dynamic, innovative, accountable, and profitable one, guided by the vision of our Preliminary Specification.

As Milton Friedman noted:

Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.

Or Henry Kissinger 

By the time the threat can no longer be denied or minimized, the scope for action will have constricted or the cost of confronting the problem may have grown exorbitant. Misuse time, and limits will begin to impose themselves. Even the best of the remaining choices will be complex to execute, with reduced rewards for success and graver risks in failure. (Henry Kissinger, Leadership)

People, Ideas & Objects believe North American oil and gas is 80–85% of the way to an existential economic, operational  and political crisis. Waiting for it to fully unfold risks catastrophe beyond our current imagination.

The culprits—producer officers and directors—are paralyzed by their culpability and predictable inaction. Their failure has pushed the industry, including its secondary and tertiary sectors, to the brink, necessitating urgent rehabilitation of capacities and capabilities and overall industry rebuilding. 

Our Preliminary Specification offers a vision for rebuilding the industry around reserves preservation, performance, and profitability, ensuring producers achieve the most dynamic, innovative, accountable and profitable operations. Time for debating alternatives has run out. We’ve laid out a framework where every individual and industry organization can contribute to this rebuilding process.

Delaying action by even six months risks irreparable damage. Consolidation won’t solve this, and trust in current leadership has eroded to the point where there’s no longer any expectations of current officers and directors. A “remove and replace” approach, aligned with the Preliminary Specification, must begin immediately—reconciling with the existing culture would be futile.

Success in averting this crisis depends on everyone finding a role in our vision of a rebuilt industry and acting now to build that. If our funding is secured but others remain passive, expecting People, Ideas & Objects to single-handedly deliver, failure is certain. Starting later, amid chaos, will also make rebuilding more difficult. Our funding decisions must be made within six months. If actions are delayed due to a continued lack of urgency, I fear we’ll lose focus when people are consumed by industry related firefighting. 

Arbitrage Strategy, Part IV, Reserve's Economics

Economics of Oil & Gas With People, Ideas & Objects 

Changes in Overhead

People, Ideas & Objects have refrained from estimating the overhead cost reductions achievable through the Preliminary Specification, until now. Overhead, primarily personnel costs for building and maintaining the capacity and capabilities to support oil and gas operations, faces imminent disruption. Dynamic technological advancements, particularly in automation and AI, are poised to transform work processes significantly.

Cloud Administration & Accounting for Oil & Gas: Currently, each producer redundantly builds its own accounting and administrative infrastructure. Our centralized, cloud-based solution eliminates this duplication, leveraging the cloud computing paradigm to drastically cut industry-wide overhead costs.

Variable Cost Structure via Joint Operating Committee: The Preliminary Specification restructures operations around the Joint Operating Committee, making all costs, including overhead, variable based on profitable production. Shutting in unprofitable production results in a null operation—neither profit nor loss—maximizing corporate profitability.

Hyperspecialization and Division of Labor: Artificial Intelligence enables hyperspecialization and enhanced division of labor, orchestrating complex processes that would otherwise be unmanageable and chaotic. Intellectual Property, one of seven Organizational Constructs in the Preliminary Specification, defines, controls access, administers licenses, and enforces authority, ensuring efficient management. Read our paper on Hyper-specialization, Artificial Intelligence and Intellectual Property. 

Automation through Permanent Software Development: The Preliminary Specification’s ongoing software development capability delivers high levels of automation, further reducing overhead costs.

Together, these features could achieve up to a two-thirds reduction in overhead costs for North American oil and gas producers. Gross overhead, typically 12–20% of revenue, translates to cost savings of 8–13% of revenue. (Note: All overhead discussed is gross, excluding capitalization and allowances.)

Discussions like these often spark fear and uncertainty about Information Technology-driven change. People, Ideas & Objects claims assumes a static comparison of a producer in the same configuration and timeframe, which may not reflect the future. We must shift from working for computers, as is common in oil and gas today, to leveraging them to amplify our strategic competitive advantages. These include harnessing Artificial Intelligence, automation, collaboration, conflict and contradiction as analytical tools, creativity, decision-making, tacit and explicit knowledge integration, design, financing, ideas, innovation, issue identification and resolution, judgment, leadership, planning, performance, quality, reasoning, research, thinking, and vision.

The future of work remains uncertain and unpredictable but is undeniably unstoppable. Embracing this path is the most productive approach for all stakeholders. Opening a buggy-whip factory today would be as misguided as it was a century ago.

Capitalization 

The oil and gas industry’s capitalization practices, as critiqued extensively in this blog, have devolved into a cultural fixation on “building balance sheets” and “putting cash in the ground.” Such misguided corporate goals, occasionally punctuated by claims that “profits don’t matter,” dominated discourse for decades.

Most oil and gas costs, being intangible, are capitalized and depleted over the life of proven reserves. SEC regulations dictate that for X proven reserves, Y expenditures are recognized, resulting in a depletion of Y/X per barrel produced. Shale’s vast reserves inflate reported profitability by stretching depletion schedules. Tax treatments differ, but People, Ideas & Objects focus on what’s required for oil and gas to compete in North American capital markets: determining the marginal price or replacement cost of an incremental barrel.

We propose a pricing model that accelerates capital recognition, treating many intangible costs as operational expenses. This approach, akin to a “third set of books” in Hollywood accounting, reflects the reality that businesses maintain multiple accounting perspectives for distinct purposes. This clarification seems necessary when, as recently as 2023, officers and directors misunderstood basic terms like “free on board” while developing the LNG export market.

Each Joint Operating Committee will receive standardized, objective monthly financial statements to assess property profitability. If a property incurs losses, partners can shut-in production, preserving reserves for future profitable operations.

In a capital-intensive industry like oil and gas, People, Ideas & Objects advocate for a fundamentally different accounting approach. Capital, the dominant cost component, must be passed to consumers in line with North American capital market expectations. We propose depleting capital costs over 30 months to remain competitive, significantly reducing the property, plant, and equipment (PP&E) account.

This accelerated depletion will establish the marginal price needed to replace a barrel of oil or gas equivalent, regardless of whether the property is a decades-old conventional well or a new shale operation. Our model also shifts some capital costs to current-month operations in product pricing calculations.

Compared to today’s market, PP&E balances will drop to 15–20% of current levels, with field activity as the key differentiator. Future profitability and enhanced free cash flows will drive significantly higher field activity.

Investors pursuing our Arbitrage Strategy should exercise caution. Current officers and directors, intoxicated by the cash flows of a capital intensive, primary industry based on partnerships, make poor decisions in this capital-intensive primary industry. With even larger future free cash flows, robust accountability—enabled by Oracle Cloud ERP and our Compliance & Governance model—and disciplined dividend policies are essential to prevent mismanagement.

Where’s the Value 

Financial statements evaluate a firm’s performance, they do not capture an organization’s value. Capital markets assess a firm’s value by discounting its future cash flows, driven by the capacity and capability of its reserves to sustain or expand those flows.

These adjustments to capital costs, combined with higher commodity prices needed to achieve replacement value, will boost the free cash flow of a profitable producer. Additionally, overhead costs, now variable and charged directly to the Joint Operating Committee, will be included in commodity price calculations. This ensures that incurred overhead costs are recovered the following month, creating a “cash float”—a standard business practice.

The capital-intensive nature of oil and gas, with the scope and scale required to maintain and grow deliverability over the next 25 years, presents a formidable challenge.

Conclusion to Capital Assets, Cash and Working Capital 

Contrary to “building balance sheets" and “putting cash in the ground,” or spending the allowance investors are willing to provide to what we’ve described as the “old” producers. The Preliminary Specification sets in place a method of business operations to meet their future demands. Where officers and directors will be able to independently undertake the profitable operations of an actual business. 

The “new” producers as we’ve described them will have an independence in their operations unlike what we have seen before. Where financial performance dictates that they are in control and are able to pick among the best opportunities available. Where they have the financial wherewithal to undertake successful completion of what it is they undertake. Where the drilling rig price quoted is x and the producer respectfully pays x with no expectation of a discount, only the absolute performance that x commands. 

Instead of having property, plant and equipment recorded at sky high levels in an attempt to emulate the value of the firm. The capital configuration is different through the Preliminary Specification. Costs are being passed to the consumers in a competitive manner. Competitive in terms of price and competitive in terms of performance in the capital markets. Cash and working capital more specifically are the tools in which producers accomplish their objectives. 

The industry in the past two decades has had diminishing working capital due to their lack of performance. This is the reason that nothing is being done in the industry today, no one has the money. They don’t have the money because they haven’t made it, don’t know how to make it, no one’s giving it to them anymore and therefore choose only to listen to music with their friends in the basement. 

Compare what an effective executive such as President Biden is able to accomplish in one term and contrast that to one day of President Trump. There’s a reason for the performance differential, however the contrast is appropriate between what a producer is like today and the type we need very soon. Having cash to enact the producers' will is what’s needed. Without it all you can do is beat up vendors for discounts. And in turn, just don’t ask for focus or performance. 

Greatest Endowment of Wealth Ever, Destroyed

The Wall Street Journal reports that “U.S.drillers Say Peak Shale has arrived.” An admission they’ve taken the greatest endowment of wealth ever seen, and destroyed it in not more than two decades. 

Lower oil prices are expected to precipitate a decrease in crude output that won’t easily be reversed. 

Natural gas production has plateaued at best, and the service industry is severely weakened, operating with only 578 active rigs compared to nearly 2,000 in 2015. Decades of producer mismanagement have financially devastated the service industry, a crisis exacerbated by shale’s steep decline curves, high costs, and lengthy development timelines. In an industry that doesn’t make any money, doesn’t know how and doesn’t care to bother to make any money. 

Oil & gas are critical to U.S. economic and political stability, ideally from a position of energy independence or dominance. People, Ideas & Objects have long anticipated this challenge, proposing the Preliminary Specification as a comprehensive organizational framework to address the industry’s needs and objectives.

Our reliance on oil & gas intensifies daily, with each barrel delivering 10,000–25,000 man-hours of labor equivalent and serving as a key feedstock for Artificial Intelligence. Yet, incumbent officers and directors prioritize personal gain over industry health. Since 2012, the Preliminary Specification, built on over a decade of research, has offered a solution to avert a broader societal crisis. While producers now acknowledge the issue, their recognition is inevitable but insufficient without action.

Resolving this crisis begins with organization. The Preliminary Specification provides the roadmap to rebuild a dynamic, innovative, accountable and profitable oil & gas industry.

Arbitrage Strategy, Part III, One Lever, Four Actions

It’s tempting to claim that replacing and rebuilding the oil and gas industry is unnecessary and that current leadership has everything under control. People, Ideas & Objects will not lead that charge. We seek new leaders who instinctively recognize the industry’s operational and financial disarray and are ready to pursue alternative paths. Organizations don’t change—people do. Addressing the scale and scope of oil and gas challenges requires organization first. This transformative leadership and change must be backed by the financial community to succeed. Please read our papers on leadership in oil & gas here and here. And our April 2025 White Paper on this Arbitrage Strategy. 

Broad participation in shaping the future oil and gas industry is critical now. Further delays in rebuilding a viable industry are unaffordable. Who will consumers turn to when their energy needs go unmet, forcing reliance on foreign producers? Ceding control of North America’s economic future is unacceptable and must not be passively entertained. This isn’t yet a crisis, but it looms large.

Whether investors choose to sue producer officers and directors for willful misconduct or negligence will be decided by those with greater authority than I. Leverage lies with those who have witnessed decades of poor producer performance. The current situation was predictable, inevitable, and widely discussed by People, Ideas & Objects, making it nearly impossible for officers and directors to claim ignorance—they had to willfully ignore the warning signs.

Today, leverage rests with investors eager to reengage with oil and gas. The status quo leadership, responsible for these issues, will never address them. Acknowledging the problems would demand they admit their culpability.

Investor Actions 

Beyond their overstated claims of shale innovation, oil and gas producer officers and directors have revealed one undeniable truth: shale represents the continent’s greatest wealth endowment. Yet, after two decades of their leadership, the industry lies in ruins, with no residual value. An industry that neither profits, knows how to profit, nor cares to profit is unsustainable.

First-quarter 2025 reports confirm production declines in over half of our sampled producers, a direct result of their reckless destruction of the service industry, now operating at 30% of its pre-2015 capacity. Their “muddle through” strategy—relying on misinformation, blame-shifting, and scapegoating—yields no progress, only mounting challenges. Under current leadership, the industry is locked in a decades-long culture of decline that will devour any reform attempt. This culture must be abandoned decisively, replaced with People, Ideas & Objects’ vision of reservoir preservation, performance, and profitability.

Decades of leniency have been granted to these leaders, yet the industry continues its downward spiral. Oil and gas are no longer commodities to be taken lightly—our economic and political future hinges on energy independence, or even dominance. Consolidation, a misstep that maintains inflated asset values through dilutive share swaps, is the wrong path.

The investment community must now lead, using this arbitrage strategy to transfer the industry to new hands. By accelerating property sales, “new” investors can rebuild oil and gas under a culture of reservoir preservation, performance, and profitability, as outlined in the Preliminary Specification. The investment community’s objective, unrelenting guidance is essential to wrest control from self-serving officers and directors. The industry’s scientific brilliance and innovation must drive competitive differentiation, enabling dynamic, innovative, accountable, and profitable producers to compete fairly on North American capital markets.

The service industry, battered by decades of producer abuse, requires active rebuilding within this vision. Producers, through their deceit, bear the blame and cannot expect the service industry to risk further exploitation without shared commitment. If producers invest meaningfully, respect may follow.

Investors now hold absolute leverage due to officers and directors’ failure to act, breaching their fiduciary duties and exposing themselves to personal financial liability. This leverage can drive the necessary business transformation. The time for action is now—we all share a duty to avert further consequences. North American consumers will soon demand accountability, and the fallout will be severe for those unprepared.

Industry Leadership Actions

Since the early 2000s, I have built a personal knowledge management system inspired by Nobel Prize winner Herbert A. Simon’s insight:

In an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention.

(Simon, H. A., 1971, Designing organizations for an information-rich world, in Computers, Communications, and the Public Interest, pp. 40–41, The Johns Hopkins Press).

Using tools like Readwise (https://readwise.io/i/paul8934 for one month free) and its Reader app, I collect and review highlights from books, articles, PDFs, X posts, and podcasts via Snipd (https://get.snipd.com/pAbF/0sbistdl ). My system, enhanced by AI, curates content by searching for conceptually similar ideas. A striking example comes from Aleksandr Solzhenitsyn’s The Gulag Archipelago 1918-1956, a challenging but essential read for those swayed by ideological extremes:

A bold thought, a desperate thought, a thought to raise a man up: how could things be changed so that instead of us running from them, they would run from us? Once the question was put, once a certain number of people had thought of it and put it into words, and a certain number had listened to them, the age of escapes was over. The age of rebellion had begun.

AI analysis of my collection surfaces related themes of transformative shifts—from fear to resistance, passivity to rebellion—mirroring Solzhenitsyn’s spark of collective action. This resonates with the urgent need for change in the oil and gas industry—namely, the moment where fear and passivity give way to collective resistance and a new age of rebellion or transformation:

1. The clearest parallel is found in another section of Solzhenitsyn, where an ordinary act of refusal—"I’m not going"—becomes contagious and tips the balance from acquiescence to collective resistance. As others join in and refuse to let the authorities take a fellow prisoner, the captors realize that they can no longer operate with impunity. Solzhenitsyn writes that "[w]e were thousands! that we were... politicals! that we could resist!" The passage concludes with a sense of the revolution gathering strength and the "wind that seemed to have subsided... sprung up again in a hurricane to fill our eager lungs"—a quintessential image of the transition from escape and resignation to rebellion and collective power.

Leadership from those specified above know it’s time. 

2. Another powerful conceptual sibling is from John Locke, where resistance to tyranny is reframed: "those who justly resist are not the rebels; rather the rebels are those who are justly resisted." The doctrine of just resistance, rather than promoting rebellion, acts as the "best fence against rebellion" because it reminds rulers not to test the people’s tolerance for injustice. This passage carries the idea of a conceptual switch—of the moment when individuals and groups see that the real disturbance is not in resisting but in allowing unchecked authority.

The true rebels are not us but the small cadre of officers and directors who have exploited the system for personal gain. They hold the responsibility, accountability, and resources to lead the industry, not to enrich themselves. The status quo offers no viable future. Investors must act decisively, sending an unmistakable signal for reform, as further delays will deepen and prolong our challenges.

3. In Kissinger’s World Order, revolutions are described as erupting "when a variety of often different resentments merge to assault an unsuspecting regime." The broader the coalition, the greater the transformative potential—the parallel here is in the gathering of thought and will, when isolated individuals suddenly see themselves as part of something larger, and revolutionary change becomes possible rather than impossible.

In an us vs. them, they are the small cadre of officers and directors who hold the responsibility, accountability and resources to lead the industry, not to fuel their personal empire. 

4. In Thomas Schelling’s analysis of "spontaneous" revolt, he notes that when tyranny is effective in making examples of leaders (thus exacting a price for resistance), people will not move until "a signal so unmistakably comprehensible and so potent in its suggestion for action" is received. Once that threshold is crossed, and the potential for mutual support is clear, "spontaneous" collective rebellion becomes possible.

I believe that day is today. If left too much longer our difficulties become more profound and protracted. Investors must send "a signal so unmistakably comprehensible and so potent in its suggestion for action" that there is no ambiguity. 

5. Victor Davis Hanson discusses the concept of the "counter-revolution," a moment when the "madness" of a revolutionary situation reaches its limits and a critical mass seeks to restore normalcy. This is an explicit call to collective change, where individuals stop running and attempt to reverse the tide.

How many more chances will current leadership receive? How can we justify inaction when the need for change is clear? The industry’s trajectory under these officers and directors risks an existential crisis for oil and gas, threatening North America’s economic and political stability. Investors must leverage their authority to drive a mental shift toward action, using the Preliminary Specification’s vision of reservoir preservation, performance, and profitability as the foundation for rebuilding.

6. In the podcast Back to the People, the idea that "doing the right thing... puts the biggest target on your back and they will hunt you" directly echoes the existential risk and courage required to move from compliance or flight to standing one’s ground—even in the face of extreme danger. The passage details the necessity and inevitability of taking a stand, at great personal cost, when confronted with injustice.

My journey advocating for industry reform has taught me that ideas have consequences. The Preliminary Specification challenges entrenched norms. Is it enough to catalyze the investment community’s resolve? If left unaddressed, the industry’s decline could redefine “crisis” in catastrophic terms.

7. A different but related angle is found in Changemaking and overcoming resistance: Travis Kalanick asserts that "to overcome resistance to change, build trust with those you are asking to change." The notion here is about overcoming a culture of passivity or hostility—transforming fear and inertia into coordinated change, which echoes Solzhenitsyn's theme of the mental shift that precedes action.

Just as Solzhenitsyn described a turning point where courage reaches critical mass, we stand at a crossroads. Investors and new leadership must seize this moment to confront the status quo, shift from resignation to action, and rebuild the industry. History turns on such moments—let this be ours.

8. Lastly, in another highlight from Kissinger's World Order, it's observed that "[t]he grave conditions described here must, in the end, provide the impetus for societies to insist on meaningful leadership... greatness in history resides in the refusal to abdicate to vast impersonal forces," echoing the idea that history turns when people stop fleeing and instead face their challenges head-on. 

Each of these passages encapsulates—like Solzhenitsyn’s—those pivotal moments where thought and courage reach critical mass and the balance shifts from submission to confrontation, resignation to rebellion, and thus, where history turns. 

In Summary, Investors Have One Lever - Four Actions

Our strategy relies on the following understanding. Producer officers and directors can be incentivized to facilitate their companies’ liquidation to reduce their personal liability and preserve Directors & Officers (D&O) Insurance coverage. Investors are able to enact the Arbitrage Strategy by doing the following. 

• Acquisition of conventional and unconventional reserves at ultra low commodity prices. 

• Ultimately realizing both price and reclassification increases in reserves valuations. 

• Obtaining profitable operations through a reorganized and Preliminary Specification enabledindustry. 

• Producers can be directed to distribute special dividends of the proceeds from property sales to assist their investors in funding their acquisitions. 

• Enable People, Ideas & Objects reservoir preservation, performance and profitability culture. “New” investors purchase, and direct “old” producers to acquire Profitable Production Rights. People, Ideas & Objects method in which to fund the Preliminary Specification. 

• Producer officers and directors are motivated to participate in their liquidation to mitigate their liability and maintain D&O Insurance Coverage. 

• Indirectly stimulating the “new” producers leadership market to initiate action in creating dynamic, innovative, accountable and profitable oil & gas producers.